Why a higher price can raise demand

Textbook demand curves slope downward. Several well-documented categories refuse to: wine, cosmetics, professional services, gifts. Raise the figure and volume rises with it, and the buyers are not confused about what they paid or unable to read the label.

What everyone sees

The usual reading is snobbery: expensive things are bought in order to be seen buying them, so a higher figure delivers more status. On that account the effect is a curiosity confined to luxury goods and irrelevant to ordinary markets.

What is actually happening

Two separable forces operate. Conspicuous consumption, described by Veblen, where visible expense is the point. And quality inference, which works in private: where quality cannot be judged before purchase, price is the most legible signal available, and experiments have found the same wine reported as more pleasant when participants were told it cost more. The inference is often correct, which is what keeps it in circulation.

Why it stays hidden

The effect is concealed by the vocabulary used to describe it. Buyers explain the choice by referring to taste, finish or service — real attributes that the price led them to look for and then to find. Nobody experiences an inference as an inference, so the price appears to have been justified by the product rather than the other way round.