Consumer Psychology

Why Expensive Products Increase Demand

Understand how a higher price can raise perceived quality and desire — the counterintuitive cases where expensive sells more.

  • Intermediate
  • 10 min total
  • 11 chapters

What decision this helps you make: How to recognize when raising a price increases demand — and use it without overreaching.

What this topic is

For some products, a higher price increases demand — because price signals quality (the price-quality inference) and status (Veblen goods). When people can't judge quality directly or want the prestige of an expensive item, raising the price can make the product seem better and more desirable.

Why it matters

It overturns the basic law of demand (higher price = less demand) for an important set of products, and it's the flip side of the underpricing trap. Understanding when expensive increases demand lets you price for maximum value — and recognize the specific conditions where a higher price wins, rather than assuming lower is always better.

Who should learn it

Anyone pricing a premium, prestige, or hard-to-evaluate product — and anyone who's ever wondered why raising a price sometimes boosts sales.

What you will understand

  • See why higher prices can raise perceived quality and demand
  • Understand the price-quality and status mechanisms
  • Know the specific conditions where expensive sells more
  • Use higher prices to signal value — without overreaching

Prerequisites

Common misconception

"Higher prices always reduce demand." For an important set of products, a higher price increases demand — because it signals higher quality (when quality is hard to judge) and confers status (for prestige goods). Raising a price can make a product seem better and more desirable, not just more expensive. Expensive sometimes sells more — the opposite of the basic law of demand.