Hello! The Veblen Effect is a phenomenon in which potential buyers seek to purchase a product at the highest price due to the opinion that it is better and of higher quality. That is, it turns out that the more expensive the product, the greater the demand for it. After all, in this case, it is inaccessible to many people, which is why its attractiveness grows. Passion for brands and popular trademarks is typical mainly for young people, but adults also fall into this trap. And today we will take a closer look at why this happens.
General information
The term itself originated in 1899 thanks to Thorstein Veblen. It was he who first described this effect in his book The Theory of the Leisure Class. Thorstein was of the opinion that wealthy individuals lay out tidy sums in order to feel the support behind their backs. That is, directly social status in society. They demonstrate the possibilities of their position. Moreover, expensive is not always synonymous with quality.
Examples of a wasteful lifestyle do not belong only to modern people, in all ages this phenomenon has affected the elite society. In 1550, Gaspare Ducci, a merchant from Italy, wishing to show his high-ranking guest his abilities, treated him to an unusual delicacy — oysters in gilded shells.
Elvis Presley is not far from him. In 1976, he used 5500 gallons of fuel to fly his own plane from Memphis to Denver for hamburgers.
Hassanal Bolkiah, better known as the Sultan of Brunei, went down in history not only for his ability to rule the state, but also for his passion for luxury. The media calls him a «life burner». Since Hasanal has such financial resources that he could cure almost all sick people in the world. But he doesn’t care about that. Living in a mansion with about 1 rooms and a jet encrusted with jewels and trimmed with gold, he spends over $700 a day in pocket money.
He celebrates birthdays and weddings on such a scale that no one ever dreamed of. For example, for his 50th birthday, he ordered Michael Jackson. And do you know how much it cost? At 17 million dollars. Moreover, not everything is smooth in the state economy.
Paradoxes
Surprisingly, this phenomenon is a complete contradiction to the existing law of demand. Which says that an increase in the cost of a product leads to a decrease in its consumption. Which is quite justified. If a person is used to buying, say, milk, at one price, then when its cost increases, he will look for alternatives.
Moreover, another paradox is connected, in the eyes of individuals with a fairly good financial situation, everything that is inexpensive seems ugly or of poor quality. Weber called such people the leisure class. They are ready to give large amounts of money just for a brand, a name, for the opportunity to consider themselves special, not like the majority.
Let’s take fashion, for example. Not always the things of famous designers are comfortable. And a mass-produced bag can look much prettier and sleeker than one that has been handcrafted. But a rich person, under the influence of the Veblen effect, will not allow himself to buy cheap things.
And this is not only characteristic of idle individuals, the middle class also strives to conform to the imposed stereotypes. Even if you take the situation with Apple products. A significant part of consumers fell into a debt hole. Since the desire to own an iPhone, and therefore to feel imaginary significance in the eyes of others, turned out to be so great that the real opportunities and adverse consequences after applying for a loan were ignored.
If about status, then a rich person may not like this very iPhone, but he is obliged to use it. Since society may not understand why he does not choose the best. He risks ruining his reputation. The reputation of a person who can afford quality and comfort.
Influence of business
A decrease in the price of a branded product can lead to the fact that the demand for it will stop altogether. Consumers will not be interested. An interesting example is the Four Seasons Hotel. This group of hotels is considered very prestigious, and most billionaires use only their services. But when attendance drops in a certain city, the management decides to close the hotel, instead of attracting more people with discounts. Since then it will become available, which means it will lose its prestige.
Do you know such a great designer as Pierre Cardin? Now he has lost his popularity, ruining the image. Because, creating for high fashion, he decided to make beautiful and fashionable clothes more accessible to others. And he took up ready-to-wear, setting up mass production.
Snobbery
This paradox is also called the snob effect. But I would put a little emphasis on the fact that the Veblen phenomenon indicates the need to choose the most expensive product among the presented similar ones. But snobbery characterizes a person a little differently. This is someone who seeks to put themselves above the rest. It is somewhat similar to arrogance, only the use of others is added.
For example, such a person divides acquaintances and strangers into different social categories. Under which he chooses the style of communication. Those who find themselves below him, for example, intellectually or financially, will not receive anything other than neglect, and sometimes even contempt. But before the better, he will fawn in order to achieve location. This is the elite, to get into the ranks of which he is trying. You can read more about communication, from the point of view of psychology, here.
Causes of Waste
It is clear that everyone has their own personal life story, in connection with which an individual type of behavior and a way of dealing with money is formed. But here I will briefly summarize the most common reasons why an individual seeks to purchase a product that is somewhat overpriced.
- Fear of poverty. In addition to the social status, which has already been mentioned, that is, the need to constantly maintain it, choosing the best, there are also personal experiences. Such a person is afraid of poverty. In our time, an insufficiently high income indicates that you will have to be content with little, limit yourself in desires and be in not particularly comfortable conditions. And sometimes even starve, freeze, get sick and so on. It scares. And it frightens so much that anxiety pushes a person to make rash purchases. Just to feel safe. It all happens unconsciously. And gives the illusion of carelessness.
- Shame. Again, in today’s society, who gets more recognition? Who do millions want to look up to? That’s right, for billionaires, those who, as they say, «money do not peck.» It’s embarrassing to have a low income. It seems that then it is worse than others and not worthy of love, respect and so on. Relationships are harder to build when there is no finance.
- Violation of self-worth. If a person measures his own peculiarity and value with material ones, then he falls into a trap. She only feels good about shopping. Accordingly, things depreciate over time, saturation does not occur, and then there are mental anguish, difficulties with desires. It seems that everything you want, you can afford, but there is no joy from this. Looking for something special that will make you feel good again. By the way, you can take a self-esteem test.
- Emotional void. Someone is trying to fill it with food, someone with the help of alcohol, drugs, promiscuity or work. Wasteful people try to get pleasure in this way. To replace with branded products, technology what you can’t get for some reason. For example, dissatisfaction with marriage can lead to a shift in focus to a new value — spending.
Completion
Finally, I want to recommend an article about shopaholism, which is located here. Take care of yourself and increase your level of awareness. To avoid difficulties and not fall into traps. Get to know your inner world. What can you be proud of, what can you rely on when troubles arise? Feeling his own importance, a person will be able to rationally approach the acquisition of material values.
By the way, here’s another interesting effect called the cobra effect. Read it, I think you will be interested.
The material was prepared by a psychologist, Gestalt therapist, Zhuravina Alina.