Veblen goods are a topic that is covered in the first semester of any serious econ program. Buying them is perfectly rational and can be modeled mathematically.
Veblen Goods sounded a lot like Giffen goods which were covered in the economics module of my CS degree. I had to check, they're related [1]:
"... both Veblen and Giffen goods have an upward-sloping demand curve. This means that demand for them increases when their price increases. Their main difference is in the type of good.
Veblen goods are luxury items that connote status in society, such as cars, yachts, fine wines, celebrity-endorsed perfumes, and designer jewelry.
Giffen goods are essential goods, such as rice, potatoes and wheat. Demand stays high when prices increase because there is no ready substitute for them."
> Giffen goods are essential goods, such as rice, potatoes and wheat. Demand stays high when prices increase because there is no ready substitute for them.
The way Giffen goods were explained to me is that not only is there no substitute for a Giffen good, it is the substitute. Imagine you eat meat and potatoes and the price of potatoes increases. If you can no longer afford your regular diet and need to cut costs, well, meat is probably still more expensive than potatoes, so you buy less meat and even more potatoes.
That’s not the best explanation of Giffen goods, since it only covers price inelasticity.
The key point of Giffen goods is that, as they become more expensive, you have less to spend on alternatives and thus have to buy more of the Giffen good. For example, you normally spend 10% of your income on pasta but then the price doubles. With less disposable income, you can afford less meat, so buy more pasta instead. That said, there’s very scant evidence such an effect exists in the real world.
At this point, an economist would tend to usher in the argument made by Thorstein Veblen... Yet in a couple of ways, Birkins do not look like classic Veblen goods.
