Veblen good is a good for which demand expands with the rise in price and contracts if prices fall. These goods mainly constitute luxuries meant for conspicuous consumption. Meaning such goods are bought to boast one’s status by having something exclusive or simply very expensive. Therefore, higher the price, higher the satisfaction (of the “need”) to look distinct.
Higher the price, higher the perceived utility (or value) of the good. And lesser the price, lesser is the perceived utility. Also called snob effect.
Again, its about perception and reality may be very different from it. Also the meaning of “utility” varies person to person, situation to situation.
Behaviour of Veblen good is similar to Giffen goods i.e. opposite to law of demand that dictates demand to contract with the increase in prices and expand with the fall in prices. Therefore, both Giffen and Veblen are exceptions to normal demand rule.
However, unlike Giffen good (that are inferior in nature), Veblen goods are of supreme quality. Contrary to Giffen goods where substitution is not possible as community cannot afford, Veblen goods cannot be substituted because of their exclusivity and rarity. Another major difference between Giffen and Veblen is regarding the very nature of goods. Giffen phenomena is majorly related to necessities whereas Veblen effect is related to luxuries. Thus for Veblen goods factors like, taste, perception and norms also play their part.