Economics tells you that demand decreases as result of a price increase. This is seemingly not the case for luxury goods. People who aren’t status-seeking often find it absurd for those who spend, for example, thousands of dollars on a purse. Luxury commodity goods have an extraordinary power that their cheaper fellows don’t: representation of wealth and expression of self-identity. In today’s society, what you own increasingly speaks volume about your social and economic status; consequently, people who used to be unaffected by the lavish pursuit suddenly become drawn into the herd.

A Veblen good is defined as one whose demand increases as price increases. This phenomenon is frequently explained by a general preference for expensive goods. People equate price with quality. In order for a Veblen good to exist, a network effect or information cascade must precede. Brand names can afford to charge an extremely high price for their goods largely due to their fame. Without people to generate an information cascade and spread the word, it is challenging for a brand to build reputation otherwise.

Is Veblen good, then, a theoretical consumer good whose demand is mainly driven by consumer popularity? Where is the threshold between a normal good and a Veblen good? It is particularly difficult to distinguish between them, because sometimes price does equate quality. In the case of making a car purchase, a more expensive model may suggest safety, a better driving experience etc. more than simply status. Generally speaking, the definition of Veblen good varies across individuals who value a certain good differently and who acquire various levels of utility. A woman may not comprehend the sense in purchasing a luxury car, while a man may disapprove of purchase of expensive shoes that one can’t even walk in. After all, under the current dire economy, some companies continue to increase price and do not seem to have experienced fallen demand. Some goods certainly satisfy more than mere daily usage.

Reference:
http://www.economicshelp.org/blog/economics/veblen-goods/