What Are Veblen Goods? (5 Best Veblen Goods In 2024, How To Invest)
Veblen goods are high-quality, luxury items sought after by affluent collectors who value products like a rare wine, designer clothes from upscale boutiques, and expensive cars like Rolls Royce.
They are named after American economist Thorstein Veblen who identified conspicuous consumption as a mode of status-seeking and display of wealth in “The Theory of the Leisure Class.”
Unlike a normal good, a Veblen good wouldn’t be available in general department stores and doesn’t follow the standard price-demand curve.
Let’s explore Veblen goods - their demand-price relationship, why they contradict the law of demand, and the top 5 Veblen goods in 2024, including fine wine and luxury watches.
We will also discover how Veblen goods differ from Giffen goods and how to invest in one through Vinovest.
Further reading
- Discover how you can Invest In Fine Wines and build a rewarding wine collection.
- Also, check out the Six Alternative Investments you need to add to your portfolio in 2024.
The Price - Demand Curve Of A Veblen Good
Unlike a regular downward-curving price and demand curve, a Veblen good has an upward sloping demand curve.
It means that the demand for a good increases with the increase in its price. If the price is lowered, the demand will fall. Economists call it the Veblen Effect.
This contradicts Alfred Marshall’s extended theory of supply and demand, which states price change has an inverse relationship with quantity changes. It means that as the price of a good increase, the demand will fall as lesser people will be able to afford it.
Another noteworthy point is that there are certain exceptions to the demand and supply curve because the demand theory states that preferences are unaffected by price rise or the quantity supplied. Economists call it interaction effects.
So, the demand and supply curve of Veblen goods doesn’t entirely violate the law of demand.
Why Does the Demand for a Veblen Good Increase With Price?
Sociologist Thorstein Veblen explains conspicuous consumption (or the Veblen effect) through two consumer behaviors.
- Invidious Comparison: A person’s desire not to be perceived as a member of a lower status
- Pecuniary Emulation: A person’s desire to be perceived as a member of higher status
Given these two consumer behaviors, a luxury good would be appealing to the leisure class as long as they are unique and helps them display their status and wealth.
As the prices of a product fall, its exclusivity may diminish, and so does the appeal of the good, resulting in lower demand. It is called the snob effect.
Besides the snob effect, the lowered demand is also because consumers often associate the high price with higher quality - which is true for most Veblen goods.
Their exceptional quality and high demand are actually the reason why Veblen goods make incredible collectibles.
Examples Of Veblen Goods
Here are the top five Veblen goods.
1. Fine Wine
Like most Veblen goods, the high prices of vintage wines are driven by internal factors like climate and terroir, high-quality raw materials, and meticulous winemaking.
Wineries often make investment-grade wines in limited quantity — a few hundred bottles or so. It’s because they focus on low vineyard yields to ensure the highest quality fruit. Also, fine wines are usually aged for months (if not years) before they are released into the market.
The availability further decreases with time due to consumption.
That’s why passionate wine lovers are ready to spend thousands of dollars to get their hands on rare and expensive wine bottles.
For example, a bottle of Screaming Eagle sells for around $4000-$7000 on average, and some exceptional vintages can cost you over $23,000.
And if you go for a rare Domaine de la Romanée-Conti bottle, expect to pay over $60,000.
Additionally, the wine’s appeal and price increase as it matures and develops delicious nuances.
That’s why fine wine is a popular choice among investors.
How do you invest in wine?
A world-class wine investment company like Vinovesthelps you buy, store, and sell investment-grade wine bottles from around the world - be it New York or Tokyo.
It also helps you authenticate your bottle and insure it against breakage, loss, and theft.
To get started, follow these steps:
- Sign upon the website.
- Fill out a quick questionnaire to determine your risk tolerance and investment preferences.
- Add a minimum of $1,000 to your account.
- Start building a rewarding wine portfolio.
Vinovest charges a minimal annual fee of 2.5% (1.9% for a portfolio of $50,000 and above), which includes buying, selling, storage, portfolio management, full-coverage insurance, and authentication.
2. Fine Art
A piece of fine art is unique to an artist, and there is only one copy of it, unlike the mass-produced printed works.
This exclusivity and the time-consuming hard work behind creating a masterpiece make fine art pieces extremely expensive.
Works from prestigious, well-acclaimed artists like Picasso, Banksy, and Monet fetch millions of dollars at auctions.
3. Luxury Watches
Luxury watches are a symbol of delicate craftsmanship. It often takes hours and days of intricate hard work to assemble the pieces of a luxury watch.
Additionally, luxury watches are usually made with higher quality and rare materials like gold, silver, and diamond, which results in a higher price.
Most pricey watches are limited-edition releases, which makes them exclusive.
4. Designer Clothes
Clothes designed by upscale boutiques and luxury fashion brands like Louis Vuitton, Gucci, Chanel, and Hermes carry a tag of exclusivity.
A higher price is not only the result of exceptional quality but also the brand image.
In 2006, the famed couturier Renee Strauss, and celebrity jeweler, Martin Katz threaded a gown with 150 carats worth of diamonds scattered across the bodice. The dress retailed for an eye-popping $16.2 million.
5. Designer Jewelry
Like every other Veblen good, designer jewelry symbolizes exclusivity, exceptional quality, and fine craftsmanship.
Some of the top designer jewelry brands include Tiffany & Co., Harry Winston, Cartier, Chopard, and Buccellati.
Another class of goods that do not strictly follow the law of demand is Giffen good.
How do they differ from Veblen goods?
Veblen Good Vs. Giffen Good
Here are the main differences between Veblen goods and Giffen goods.
- While a Veblen good is high-quality, luxury good like a luxury car, a Giffen good is a non-luxury, inferior good (mostly consumer goods like rice and bread.)
- The higher demand for Veblen goods is due to their high price, exclusivity, and as a symbol of wealth. On the other hand, the higher demand and price of a Giffen good is attributed to the income effect (change in consumption due to income) and the substitution effect (replacing a cheaper, inferior good with more expensive ones due to a rise in income.)
- Veblen goods are bought by affluent consumers, while low-income households purchase Giffen goods.
Build A Collection Of Authentic Veblen Goods Like Fine Wine!
A Veblen good, like fine wine, appeals to both - consumers and collectors. Thanks to its age-worthiness and exceptional quality, fine wine has the potential to offer astronomical returns if stored correctly.
Whether you want a magnificent wine for your collection or personal consumption, Vinovest will get the right bottle delivered to you.
Sign up with Vinovest today and explore the world of fine wine investment!
