Why Do People Pay More for Less? The Mystery of Veblen Goods

Imagine you are at a toy store. You see a simple wooden truck for $10 and a shiny plastic one for $5. Most kids want the shiny one because it is cheaper. But imagine if someone told you the wooden truck was special, made by an artist, and only rich people have it.

Some people actually like things more when they cost more. This happens because of social status. Wearing a very expensive watch tells your friends, "I am important." If that same watch became super cheap, everyone would have one, and you might stop buying it because it is no longer special.

This idea was named after an economist named Thorstein Veblen. He called these conspicuous goods. You see this with fashion brands like Hermès or Rolex. They rarely sell out during sales because their low price makes them less desirable to status seekers. The high price is part of the product itself.

It is not just about quality; it is about looking like you have taste and money.