The snob effect refers to demand behavior for goods for which a well-know quality is its high price. An example of a good for which the snob effect might be expected to operate would be Rolex watches. Clearly these are very well made watches with excellent characteristics, but they are famous for being expensive and are seen by many as a symbol of financial success.

If the principle reason people buy these watches is to demonstrate financial success, Rolex watches would be less desirable if they cost less. The existence of the snob effect means that if the price of Rolex watches fell their ability to signal financial success would fall and the watch would be come less desirable.

To the extent that the snob effect explains the demand for Rolex watches we might again find that the demand curve for these watches is upward sloping.¹²

In Section 5. Market Adjustment we will examine an alternative explanation for this apparent behavior that does not violate the law of demand.