| Veblen Good |
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Commodities are Veblen goods if people's preference for buying them increases as a direct function of their price. It is claimed that some types of high-status goods, such as expensive . RELATED CONCEPTS The Veblen effect is one of a family of theoretically possible anomalies in the general Theory Of Demand in Microeconomics . Other related effects include:
The first two of these, and the Veblen effect, are discussed in a classic article by Leibenstein (1950).Leibenstein, H. (1950). Bandwagon, Snob, and Veblen Effects in the Theory of Consumers’ Demand. ''Quarterly Journal of Economics, 64'', 183–207. The concept of the counter-Veblen effect is less well known, although it logically completes the family; it was introduced by Lea et al (1987).Lea, S. E. G., Tarpy, R. M., & Webley, P. (1987). ''The individual in the economy''. Cambridge: Cambridge University Press . ISBN 0-521-26872-9 None of these effects in itself predicts what will happen to actual quantity of goods demanded (the number of units purchased) as prices change—they refer only to preferences or propensities to purchase. The actual effect on quantity demanded will depend on the range of other goods available, their prices, and their substitutabilities for the goods concerned. The effects are anomalies within demand theory because the theory normally assumes that preferences are independent of price or the number of units being sold. They are therefore collectively referred to as interaction effects. The interaction effects are a different kind of anomaly from that posed by Giffen Good s. The Giffen goods theory is one for which observed demand rises as price rises, but the effect arises without any interaction between price and preference—it results from the interplay of the ''income effect'' and the ''substitution effect'' of a change in price. Recent research has begun to examine the empirical evidence for the existence of goods which show these interaction effects.e.g. Chao, A., & Schor, J. B. (1998). Empirical tests of status consumption: Evidence from women's cosmetics. ''Journal of Economic Psychology, 19'', 107–131. A broad overview can be found in e.g. McAdams, Richard H. (1992). Relative Preferences. ''Yale Law Journal'', vol. 102, no. 1 (October), pages 1-104.. REFERENCES |
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