Veblen goods: Products whose appeal rises along with their price. Named for Thorstein Veblen (1857-1929), the American economist and sociologist who famously defined “conspicuous consumption” as the chief activity of the leisure class.
Veblen goods are an anomaly: classical economic theory dictates that demand will decrease as price increases. The Veblen effect is related to the “snob effect” and the “bandwagon effect.”
Novelist, philosophy professor, and former diamond salesman Clancy Martin writes about Veblen goods in “All That Glitters” in the June 2010 issue of Harper’s (not online):
In our store in Arlington we used to have a large framed Thai rug—depicting a king on his elephant and spangled with cheap gems and gold and silver thread—that we bought in Bangkok for $5,000 and initially tried to sell for $25,000. It hung on the wall for three years as we slowly upped the asking price, and it didn’t sell until we were negotiating it down from $150,000; we closed the deal at $110,000. The worst case of a Veblen good I ever heard comes courtesy of my friend Dave, who was doing the pricing structure for Tiffany & Co. in their new Hong Kong flagship. He came across a bottle of perfume that sold for $12,000; Tiffany’s cost was around forty bucks.
Martin’s article—worth searching out in your local library—also introduced me to a few other diamond-industry terms. In industry-speak, an “enhancement” is a fake. Also:
Women who collect sparkly things as a passion are known in the industry as crows, and with a good crow it’s an addiction: you see her every month when she gets her paycheck. The wealthiest crows are called whales.
Read my other posts about the diamond industry: on the late diamantaire David S. Kwiat; and on selling diamonds in a downturn. If the subject interests you, I recommend reading The Heartless Stone: A Journey through the World of Diamonds, Deceit, and Desire, by Tom Zoeller, which explains the myth of diamond “scarcity” and reveals how the Veblen effect (and savvy branding) transformed formerly worthless brown stones into high-priced “chocolate diamonds.”