Most of us were taught a simple rule in economics: when prices go up, demand goes down. Yet Thorstein Veblen, an American economist, spotted something different. He noticed that for certain goods, the opposite happens. Higher prices make people want them more. Think about it. A luxury handbag, a sports car, or even an exclusive wine vintage becomes more desirable precisely because it is costly. Veblen called this “conspicuous consumption” – buying not just for utility, but to send a signal about who we are.

We see it every day. Hermès’s famous Birkin bag is not just leather and stitching, it is a status symbol. Customers happily wait on lists, pay eye-watering sums, and proudly carry them because the high price is part of the appeal. Luxury brands like this have turned scarcity and prestige into an art form, and their loyal buyers play along willingly.

We may not all be selling handbags, but the psychology that drives those buying decisions is the same psychology that influences our customers, our partners, and even our teams.

Here are THREE ways the Veblen effect shows up, and how you can put it to use.