The snob effect in microeconomics occurs where the demand for a certain good by higher income strata is inversely related to its demand by those of a lower income strata. Snob effect refers to the desire to possess a unique commodity having a prestige value. The "snob effect" contrasts models in which the demand curve can have a positive slope, rather than the typical negatively sloped demand curve of normal goods. This situation is derived by the desire to own unusual, expensive or unique goods. We see snob effect when consumers want to use exclusive products, and price is quality. Such goods generally have a high economic value, but low practical value. Bandwagon Effect, Snob Effects, and Veblen Effects are discussed in Theory of Consumers' Demand and Consumer Culture.
The less of an item available, the higher its snob value. Examples of such items with general snob value are works of art, designer watches, clothing, and sports cars. Snob value criterion may vary from person to person. A person may reasonably claim to purchase a designer garment because of a certain threading technique, longevity, and fabric. The desired effect can often be achieved by purchasing a less-expensive version from a reputable brand. Collectors within a specific field can suffer from snob effect, searching for the rarest and often most expensive collectibles. Such examples are classic automobiles, stamps and coins.
The existence of positive network externalities gives rise to Bandwagon effect. Bandwagon effect refers to the desire or demand for a good by a person who wants to be in style because possession of a good is in fashion and therefore many others have it. It may be noted that this bandwagon effect is the important objective of marketing and advertising strategies of several manufacturing companies who appeal to go in for a good as people of style are buying it. Snob effect works quite contrary to the bandwagon effect.
The quantity demanded of a commodity having a snob value is greater, the smaller the number of people owning its. The utility one gets from a very expensive luxury car is mainly due to the prestige and status value.
Snob effect commonly applies to goods such as luxury cars, and rare art, but hipster culture has expanded the effect further. Goods considered mainstream lose value, so as popular trends evolve, hipster trends also evolve in parallel. While the term “snob” may connote expensive and rare goods, the effect itself applies to any good or service that decreases in value as the quantity of consumers rises.