Cheap Grande Marque Champagne skews the demand curve

Grand Marque Champagne boosts demand

Grand Marque Champagne boosts demand

I spent last night at the LSE, where I’m a governor, chairing a lecture on Scroogenomics by a Professor from Wharton School of Business. I started mulling over supply and demand curves, specifically relating to the cheap champagne deals where both Moet and Bollinger are half price (making them £14 and £18 respectively).

I’ve written in the past about luxury and Giffen goods (see my footnote for definition) but I think this sale shows a new demand pattern.

The phenomena I’m initially interested in is when demand increases with prices. I don’t know what this is called, so I’m going to call it a ‘Prestige Good’ (Update Note: Thanks to the discussion on this linked at the bottom, I’ve now been informed its called a Veblen good). An example here is Concorde: when prices increased, so did the snob and exclusivity factor, and more people wanted to go on it (my apologies to any classical economists, this is very much top of the head ramblings, not fact)

Champagne for everyone

I strongly suspect Grand Marque Champagnes like Moet and Bollinger are prestige goods. It’s not necessarily the better taste that makes them special (and often in taste tests Moet hasn’t come out so well), its’ the brand and snob factor.

Of course buying champagne itself has an exclusivity issue. The name just means sparkling wine grown in one region, which in itself doesn’t make it different.
Yet for me what’s really interesting is the huge demand for the product when it’s at half price. That’s due to the juxtaposition of the following three concepts.

  • Grande Marque Champagne is a Prestige good. Demand is increased because the price is higher.
  • Demand increases during a sale. Yet put it on half price and demand increases further as the prestige value is still perceived to be there, but it’s cheaper (the {cheap champagne} page has been enormously popular).
  • Permanently decrease price and demand would drop. My suspicion is if you lowered the price permanently it would lose the prestige factor and therefore overall demand would drop.
  • So what type of good is that, how about a ‘Perverted Prestige’ good?

    Comment and Discuss


    The last time I wrote about Giffin goods (seewhy so many Pizza 2for1s which is where demand rises as price rises.

    However having scraped the memory of the term from my A’level economics I got the definition right but the cause wrong. So let me correct that here.

    • Giffin Good. Normally demand increases as things get cheaper, yet here demand increases as price increases. Yet a Giffin good specifically describes where this happens when people have no choice and can’t substitute it.

    For example if someone is in severe poverty and the cheapest staple foodstuff is bread – if the price of bread increases, they have no choice but to buy more bread as they can’t afford to substitute it for better foods – so breads price rising means they are more depending on it and have less other options so demand increases.

    • Luxury Good. This is a good where both the amount spent and proportion of spending rises with income. A classic example is designer clothes, the more people earn the bigger a proportion of their income people spend on them (where as with an inferior good like bread as income rises you can afford substitures – so the both the amount spent and the proportion of spending drops with income).