Growing luxury brands by increasing the price: does the Veblen effect exist?
by Martin Fassnacht; Jil-Marie Dahm
Luxury Research J. (LRJ), Vol. 2, No. 1/2, 2021

Abstract: The growth of the global luxury market is mostly attributed with volume effects, which risks luxury brands' rarity and dilutes their desirability. The Veblen effect, i.e., when an increase in price leads to an increase in demand, is thus the ideal opportunity to strike a balance between growth and rarity. Although it is a widely known price phenomenon, research has neglected the Veblen effect over the past decades. The present article empirically analyses its existence through eight experiments and determines which intrinsic and extrinsic luxury purchase motivation(s) drive(s) the Veblen effect across different luxury product categories. The authors derive that the Veblen effect exists, yet it varies between hard and soft luxury goods whether intrinsic or extrinsic purchase motivations dominate respectively. This article attempts to start the discussion about the Veblen effect again for luxury academics and managers because it is an invaluable future growth opportunity for luxury brands.

Online publication date: Fri, 16-Jul-2021

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