Why a British Pizzeria Charges £100 For Its Hawaiian Pie

At Lupa Pizza, for most pizzas, you pay the price you would expect. But not the Hawaiian. It will cost you £100 (approximately $122.00):

Saying they’re vile, the chef overpriced his Hawaiian pizzas because he wanted no one to eat them. As of Tuesday, there were no orders.

Like Lupa, sometimes retailers intentionally set sky high prices. Their purpose, though, is somewhat different.

Veblen Goods

The Birkin Bag

Reputedly, there was a wait list for the wait list for Hermès Birkin bags. Although the cheapest version is a whopping $11,400, women want more than the stores can sell…even the $200,000 version.

During the past seven years, the price of the Birkin 25 rose by $1550:

The key to the Birkin market was the status conveyed by its high price. So, as the price went up the bag became even more desirable.

Items like Birkin bags violate the law of demand. With demand, price and quantity are typically inverse. When one rises the other sinks. Because Ferraris, Rolex watches, and other high end luxury Items like Birkin bags violate the law of demand, they are called Veblen goods.

Shown by Veblen goods’ upward slope, when price increases, quantity rises too :

Our Bottom Line: Conspicuous Consumption

A Birkin chronicler once told us, “That Birkin on your arm tells other women your place in society.” More than 120 years ago, Thorstein Veblen explained why.

In his Theory of the Leisure Class (1899), Thorstein Veblen (1857-1929) said that the affluent pursue useless activities like excessive shopping to convey their power and wealth. Servants and employees help the affluent do less while their money lets them signal their status by buying more. The Birkin bag is precisely what Veblen was talking about.

Thorstein Veblen was rather eccentric. I once read that he let his dirty dishes accumulate until none remained. Then he sprayed them with a hose and started all over again. This is Veblen:

With Veblen goods, we take the next step. Not only are we talking about pricey purses, but also the price is rising.

Returning to where we began, I suspect that Lupa’s £100 Hawaiian pizza could become a Veblen good.

My sources and more: Thanks to the BBC’s World Business Report podcast for alerting me to the Hawaiian pizza story. From there CNN  had the details. Meanwhile, Sotheby’s had the Birkin bag price history.

Several sentences from today’s post were in a past econlife.