⚠ The Paradox Has LimitsLow threat

The Veblen effect is a gift, but a bounded one, and mistaking its limits is dangerous. It operates only for genuinely aspirational brands, only up to a certain price, and only while the quality and mystique justify the number; push past that point and the ordinary law of demand snaps back and buyers desert. A house that assumes its pricing power is limitless — that any increase will be met with more desire — will eventually raise a price too far and discover the paradox has an edge.

There is a brand-specific danger too: the effect protects the strongest houses but not the weaker ones in the portfolio, which cannot price with the same freedom and can be damaged by trying. The very aggressive luxury price increases after the pandemic arguably tested these limits across the industry. LVMH's leading houses sit comfortably inside the paradox's bounds, and its discipline generally respects them. But the effect is a privilege with conditions, not a licence, and treating it as unconditional is how pricing power gets squandered — the 2024-25 slowdown tested exactly those bounds¹. A low-to-moderate, self-inflicted risk.