There were a lot of things that I wanted to have done before today. The 2008 Ultimate Checklists were supposed to be done, complete with a “best of 2008” summary post. Value of Cards Part V was supposed to be posted and subsequently ignored by the majority of readers. Instead 2009 Topps and Upper Deck are “live”, to use the parlance of our times, and I am woefully behind schedule.
Perhaps it’s a blessing in disguise. In this, the final episode of “the Value of Cards” series, I wanted to explore how we can make smart buying decisions in these tough economic times. Hopefully, I can piggyback on the enthusiasm surrounding the first releases of the year to gather some information that will assist in that exploration. In a welcome break from previous posts, I’ll try to keep this one short and sweet—especially since I’m about 90% sure that I made SIGNIFICANT mathematical errors in the previous post that may invalidate all of the results, although the conclusions still make sense on a conceptual level.
There is no hard an fast formula that a collector can use to make solid buying decisions, in part because every collector is different, in part because the “value” of cards is market driven and in part because there is an intangible benefit that some people get from winning auctions, opening packs, busting boxes etc. When taking those out of play though, the same questions tends to hit all collectors.
What product do I buy? How much do I buy? Where do I buy it? Let’s take a regular Topps release as an example.
Using information from Part IV we can create composite “insert odds”-- in other words, the odds of pulling any of the inserts in a given pack. .200+.167+.167+.111+.111+.083+.055=.894=89.4% chance of pulling an insert in our baseline pack. We already know that the odds of pulling a Gold card are 1:9 packs. Let’s assume that a base card is worth $.10, a given insert is worth $1 and a Gold card is worth $2. That gives us expected values:
E(Baseline) =12(.1)+.894(1)+.111(2)= $2.316 (Hobby/HTA Baseline is $2.116 because of two fewer base cards).
Based on this information/assumption alone, we can determine that buyers are getting roughly 30 cents more value out of a pack than what they are paying for it. That is great news. Now, let’s add in the “pack hits” that really make the difference between Retail, Hobby and HTA.
E(Retail)=Baseline+Odds of Relic(Relic Value)+Odds of Auto(Auto Value)
E(Hobby)=Baseline+1/36(Relic Value OR Auto Value)
E(HTA)=Baseline+1/10(Relic Value)+1/10(Auto Value)*
*I’m assuming that the guaranteed auto and relic WILL NOT come in the same pack.
Because the odds of getting a specific auto or relic card do not change across Retail/Hobby/HTA, we’re going to leave that aside. Instead, let’s arbitrarily assign values for Relics and Autographs. I suggest:
Relic=$5
Auto=$10
Also, I will only be using odds for the “Highlights” Relics and Autos, and the “Commemorative Patch” relics, as it is tedious and unnecessary to calculate the extremely remote odds “big hits” for this product.
E(Retail)=$2.316+.00052(5)+.00049(10)=$2.324 ($.193/card)
E(Hobby)*=$2.116+.0277(1.06)(5)+.0277(10)=$2.54 ($.254/card)
E(HTA)=2.116(5)+.1(5)+.1(10)=$12.08/5=$2.42 ($.262/card)
*The 1.06 in the “Relic” portion of the equation relays the relative odds of a box holding a relic instead of an auto.
Whew!
So what does this all tell us? As the value of relics and autos rises, so does the Expected Value of Hobby/HTA packs. If the value of Relics rise relative to the value of Autos, Hobby pack value increases relative to HTA packs. The opposite holds true if the value of Autos rise relative to Relics.
What does this all mean for collectors? Remember, that based on the SRP of packs, buyers pay $.16 per card for Retail, $.19 for Hobby and $.22 for HTA. With our expected values above that, we learn that buyers are getting $.03 more value per card from Retail, $.065 more value per card from Hobby and $.042 more value per card from HTA.
Woah! The Hobby pack is actually the best bet for collectors that are entirely value driven, provided that the average Auto is only worth twice the average relic. If the autographs were more prestigious, that would change the valuation in Jumbo’s favor.
Certianly, there are benefits to purchasing each type of pack: Retail is the lowest cost per pack, HTA has the best chance of pulling an Auto or Relic, but Hobby is actually the best bang for your buck, provided you can get a Hobby pack for the same price as a retail pack (which SRP indicates you can).
Certainly, circumstances will vary based on individual collectors preferences—an HTA gives the best chance for a complete set due to fewer collation variations, retail offers special inserts that may appeal to a team/player collector etc. Depending on how you collect, there are smart decisions and less-smart decisions. In my personal experience, for example, I found that I get what I need (Tigers set) whether I buy Retail, HTA or Hobby. However, both HTA and Hobby fill my sets but leave me with TONS of cards I don’t care about. I can only peddle the relic/auto sometimes and I spend way more than I will in retail. However, retail does not complete my set and I need to devote time and energy to making trades, and shipping cards. That is the tradeoff.
So before you order that Jumbo box or head to Target for that blaster, think about what you really need for your collection. As appealing as a guaranteed Auto or Relic is, what are the odds that you’ll pull a card you need, or a card you can flip as opposed to a Nyjer Morgan Auto? Assess your needs and spend wisely so that you can build your collection more cheaply and efficiently.
I know that this post may seem somewhat anticlimactic, given the buildup, and for that I apologize. I was basically testing theories on the fly, and rolling with the punches. Still, I still whole-heartedly believe that we, as bloggers, can save the world. Well, the collecting world at least.
How?
When you buy a pack or box of ANYTHING, post all of the information that comes with it. Price, odds, players in Group A, B etc. After you post it (or if you can’t post it) send it to me in an email. Don’t want to email it? Send me the wrapper.
This industry has suffered from a major lack of transparency, and too few people pay attention to the printed odds on packs. This information is there for a reason, and can actually be used to help collectors of all types decide whether to buy cards individually, by the pack or by the box. As I get more and more data from the collecting world, I will tweak my equations and hone my math skills to be able to create meaningful valuations of what products are worth your hard earned dollar.
I expect that this will be most valuable for mid- and high-end packs, where there are fewer cards per pack and a higher ratio of hits. With this information, we can decide how many packs to open, boxes to break or cards to purchase individually online. This will, of course, be a work in progress, but if you do your part (send me the info) I’ll do mine (make sense of it). So let’s get moving and start sending me those odds!
Showing posts with label Card Value. Show all posts
Showing posts with label Card Value. Show all posts
Tuesday, February 3, 2009
Monday, January 26, 2009
The Value of Cards (Part IV)
I'm sorry for the slow posting around here, this little piece has been tormenting me for a few days. If you make it through this and follow me the whole way though, you will be rewarded! Also, today was a tremendous mail day for me, so there will be all sorts of pretty pictures in the days ahead.
For a refresher, Parts I, II and III
Having wrapped up the “true” value of cards from a market perspective last time, I thought that it would be interesting to view the other side of the coin. I hypothesized that manufacturers actually have an implicit Suggested Retail Price (SRP) for cards in a pack that can be derived through a study of pack prices and printed odds. The odds come courtesy of 25 Years of Baseball and we will perform this whole analysis using Topps Series 1. For 2008 Series 1, Topps produced 5,445,000 packs of cards. Based on what? The odds of a platinum parallel are 1:16,500 packs on average. There is one platinum parallel per player, 330 cards in the set. That is 5,445,000 packs to reach the 1:16,500 average. Let’s break it down further:
Add all of those cards up and you get 5,596,531 cards. Let’s round that up to 5,597,000 to account for some of the other 1/1 cards, printing plates etc. Assuming 10 cards per pack, that leaves us with 48,853,000 Base cards or, approximately 148,000 per player in the set.
Does this check out? By this math, a Gold card would be 73 times more rare than it’s corresponding base card. Well, considering you get 1 base card in every 9 packs (or 1/90 cards is Gold) then I would say that we’re at least in the ballpark! This is useful because it allows us to create a cohesive set of relative prices for base cards and inserts. For all non-relic and non-autographed cards, the only thing that makes one card more valuable than another card is scarcity. With that, we can create this conversion table:
Base Card=1/7 ASR50=1/4 OTG=1/9 YIR=1/3 Campaign=1/8 MMHR=1/8 TCH=1/5 MMS=1/73 Gold=1/2596 Black
These are the cards that have no intrinsic value—e.g. there is no jersey or autograph that actually affects the cost/value of the card. Let’s say our baseline pack (retail pack) features 12 base cards for $1.99. That, in essence, creates an SRP of a base card of $.166. Now, with our conversion chart, we can extrapolate that to SRPs of other cards!
ASR50=$1.16
OTG=$.664
YIR=$1.49
Campaign= $.49
MMHR=$1.32
TCH=$1.33
MMS=$.83
Gold= $12.16
Black= $430.9
Clearly, our equation starts to fail at the extremes. However, it actually does a surprisingly decent job of estimating the market prices of base and insert cards. I would say that many of us, especially those that need it for a specific collection, would be willing to pay the “SRP” prices for these cards. So, for “regular” cards, the manufacturer’s “SRP” and the market price seem to match pretty well.
Can that same logic convert to “the hits?” Autograph and Relic cards create an actual cost for the manufacturer, and you would expect that cost to be reflected through higher “SRP” prices and higher market prices. Let’s use our ol’ friend Albert, who started this whole ruckus a few weeks ago. Based on what The Sportscard File has told us, you would expect the SRP for a Pujols autograph to be at least $250—the $200 cost plus a 25% profit margin (this ignores production costs). Let’s see if our data can help here.
Pujols happens to have a Group A autograph in Series 1, and we find, via pack odds that there are 34 Pujols Autographed cards in this set. We have already established that our simple relationship fails in extremes, and that holds true here. The Pujols card would have an SRP of $4,376.47—clearly an absurd figure. So what else can we do?
Let’s go back to the basics. There are three types of packs that exist: Retail, Hobby and HTA Jumbo. Let’s assume that the only difference between these is the number of cards in a pack and the relative likelihood of receiving a Relic or Autographed card. The SRP of a Hobby Box is $70 and features 36 packs with 10 cards per pack. SRP of a Retail Box is also $70 but has 12 cards per pack. The SRP of an HTA box is $100 and has 10 packs with 46 cards each. Just dividing SRP by number of cards we get:
Retail: 16 cents per card
Hobby: 19 cents per card
HTA: 22 cents per card
A retail box has 72 more cards than a Hobby Box—or the equivalent of 6 packs ($12) worth. To make up for that difference, the Box provides $12 of additional value, on average, through a relic OR an auto. To get the 460 cards that come in an HTA box via Retail would cost only $73.60, a difference of $26.40. Accordingly, the HTA provides the additional value of a relic AND an auto.
What does this mean? The guaranteed Relic or Auto in a Hobby Box has an average value of $12. The guaranteed Relic AND Auto in an HTA box has an average value of $26.40. Using these numbers, and the group odds, we can at least figure out the value of a card from a particular group.
Lets assume that the values of cards within a Group are constant and that relative values are proportional to the card’s scarcity. I realize that this may be a stretch, but it’s all we’ve got for now. In this case, a Group A autograph is the scarcest, and most valuable. With 34 cards per subject it is worth 1.41 times more than a Group B card, of which there are 48 cards per subject. Using that logic, we can make another relative value equation for Autos:
A=1.41B=11.11C=29.79E=22.35F=34.5G
I do not know why there is no Group D breakout in the odds that I found online, so we’ll have to deal with what we’ve got.
Similarly, for Relics, where Group D is the scarcest at 197 cards per subject:
D=5.34C=1.3B=2.56A
There are 19,492 autograph cards and 20,911 relic cards (using only Highlights Autos/Relics and Commorative Patch relics for simplification). In other words, there is one relic card for every 1.07 autograph cards. Earlier, we calculated that there are 5,445,000 packs. In a Hobby Box 1/36 packs has either a relic or an auto. That means that 151,250 packs have either a relic or an auto.
Total=r+a
r=1.07a OR a=.935r
151,250=r+.935r=1.935r
r=78,165
a=.935r=73,084
Knowing how many relics and autos there are tell us that there is a 51.68% chance that the “hit” is a relic and a 48.32% chance that it is an auto. Almost there…
The Expected “Value” of our Auto is .4832*12= or $5.80 Let’s use the median instead of the mean to determine that the median card falls in Group F. If F=$5.80 and A=22.35F, then A=$129.63
Clearly, this is well below the $200 that Albert charges for an Autograph. There could be two reasons. The first, is that I don’t know what I’m doing mathematically and that I even ended up with the proper number of figures is a miracle in and of itself. That is the most likely probability. The other reason is that Topps is using Pujols to sell the product (he is on the box after all) and is willing to take a loss on the box to entice people to buy. This is what The Sportscard File has called a “loss leader.” It is a card that entices people to buy the product, but actually costs the manufacturer more money to produce than they expect to get back off that card.
You see, markets rarely lie. They tend to incorporate all of the available information to determine prices. Would you be surprised to see a 2008 Topps Pujols Autograph sell on eBay for $129.63? How about a Pujols Autograph #/34 for that amount? That sounds pretty darn accurate to me.
My point is, Topps has implicitly set an SRP of around $130 for this card, even though it costs them more to produce it. They make up for it by also inserting cards that have low SRPs (Group C is SRP’d at $4.35—sounds about right for the Lance Broadway auto I pulled from my box), and making the difference back as profit. Interestingly, the relic in the box has an Expected Value of $6.20. This may be due to the fact that the relic cards are almost all stars or semi-stars, whereas the autos can be quite obscure.
I’m not mathematically proficient enough to continue this to figure out how things change by guaranteeing both in the HTA box. I know that r+a=$26, but I kind of fall apart there. Feel free to take this and run with it.
Again, I could be wrong on all of this and I would love it if somebody could correct me or help on any of it, but it makes sense to me intuitively. Next time, IN MY FINAL INSTALLMENT, I’ll talk about how we can use this information for good instead of evil and finally explain how we, as bloggers, can save the world.
Thanks for making it through.
For a refresher, Parts I, II and III
Having wrapped up the “true” value of cards from a market perspective last time, I thought that it would be interesting to view the other side of the coin. I hypothesized that manufacturers actually have an implicit Suggested Retail Price (SRP) for cards in a pack that can be derived through a study of pack prices and printed odds. The odds come courtesy of 25 Years of Baseball and we will perform this whole analysis using Topps Series 1. For 2008 Series 1, Topps produced 5,445,000 packs of cards. Based on what? The odds of a platinum parallel are 1:16,500 packs on average. There is one platinum parallel per player, 330 cards in the set. That is 5,445,000 packs to reach the 1:16,500 average. Let’s break it down further:
Gold Cards = 662,640 (pack odds say 605,000, but 330x2008 says otherwise)
Black Cards=18,810 (pack odds say 57,315, but 57*330…)
All Star Rookie 50th: 1,089,000 (55 Subjects-19,800 per player)
Own The Game: 907,500 (25 Subjects – 36,300 per player)
Year In Review: 907,500 (60 subjects – 15,125 per player)
Campaign 2008: 605,000 (12 subjets - 50,416 per person)
Mantle HR History: 605,000 (34 cards – 17,794 per card)
Trading Card History: 453,750 (25 subjects – 18,150 per card)
Mantle Story: 302,500 (10 cards – 30,250 per card)
Commemorative Patch Relics: 13,216 (35 subjects- 377 per card)
World Champion Auto Relics: 500 – 50 per player (odds say 377)
World Champion Relics: 1,136 (15 subjects – 75 per player)
Highlights Auto—Group A: 170 (5 subjects – 34 each)
Highlights Auto—Group B: 718 (15 subjects – 48 each)
Highlights Auto –Group C: 5,683 (15 subjects – 378 each)
Highlights Auto –Group E: 5065 (5 subjects—1013 each)
Highlights Auto—Group F: 6083 (8 subjects – 760 each)
Highlights Auto—Group G: 1773 (1 subject – 1773 each)
Highlights Relic –Group A: 1513 (3 subjects –504 each)
Highlights Relic –Group B: 256 (1 subject—256 each)
Highlights Relic –Group C: 3156 (3 subjects – 1052 each)
Highlights Relic –Group D: 2770 (14 subjects –197 each)
Presidential Stamp Collection: 2792 (30 subjects – 93 each)
Add all of those cards up and you get 5,596,531 cards. Let’s round that up to 5,597,000 to account for some of the other 1/1 cards, printing plates etc. Assuming 10 cards per pack, that leaves us with 48,853,000 Base cards or, approximately 148,000 per player in the set.
Does this check out? By this math, a Gold card would be 73 times more rare than it’s corresponding base card. Well, considering you get 1 base card in every 9 packs (or 1/90 cards is Gold) then I would say that we’re at least in the ballpark! This is useful because it allows us to create a cohesive set of relative prices for base cards and inserts. For all non-relic and non-autographed cards, the only thing that makes one card more valuable than another card is scarcity. With that, we can create this conversion table:
Base Card=1/7 ASR50=1/4 OTG=1/9 YIR=1/3 Campaign=1/8 MMHR=1/8 TCH=1/5 MMS=1/73 Gold=1/2596 Black
These are the cards that have no intrinsic value—e.g. there is no jersey or autograph that actually affects the cost/value of the card. Let’s say our baseline pack (retail pack) features 12 base cards for $1.99. That, in essence, creates an SRP of a base card of $.166. Now, with our conversion chart, we can extrapolate that to SRPs of other cards!
ASR50=$1.16
OTG=$.664
YIR=$1.49
Campaign= $.49
MMHR=$1.32
TCH=$1.33
MMS=$.83
Gold= $12.16
Black= $430.9
Clearly, our equation starts to fail at the extremes. However, it actually does a surprisingly decent job of estimating the market prices of base and insert cards. I would say that many of us, especially those that need it for a specific collection, would be willing to pay the “SRP” prices for these cards. So, for “regular” cards, the manufacturer’s “SRP” and the market price seem to match pretty well.
Can that same logic convert to “the hits?” Autograph and Relic cards create an actual cost for the manufacturer, and you would expect that cost to be reflected through higher “SRP” prices and higher market prices. Let’s use our ol’ friend Albert, who started this whole ruckus a few weeks ago. Based on what The Sportscard File has told us, you would expect the SRP for a Pujols autograph to be at least $250—the $200 cost plus a 25% profit margin (this ignores production costs). Let’s see if our data can help here.
Pujols happens to have a Group A autograph in Series 1, and we find, via pack odds that there are 34 Pujols Autographed cards in this set. We have already established that our simple relationship fails in extremes, and that holds true here. The Pujols card would have an SRP of $4,376.47—clearly an absurd figure. So what else can we do?
Let’s go back to the basics. There are three types of packs that exist: Retail, Hobby and HTA Jumbo. Let’s assume that the only difference between these is the number of cards in a pack and the relative likelihood of receiving a Relic or Autographed card. The SRP of a Hobby Box is $70 and features 36 packs with 10 cards per pack. SRP of a Retail Box is also $70 but has 12 cards per pack. The SRP of an HTA box is $100 and has 10 packs with 46 cards each. Just dividing SRP by number of cards we get:
Retail: 16 cents per card
Hobby: 19 cents per card
HTA: 22 cents per card
A retail box has 72 more cards than a Hobby Box—or the equivalent of 6 packs ($12) worth. To make up for that difference, the Box provides $12 of additional value, on average, through a relic OR an auto. To get the 460 cards that come in an HTA box via Retail would cost only $73.60, a difference of $26.40. Accordingly, the HTA provides the additional value of a relic AND an auto.
What does this mean? The guaranteed Relic or Auto in a Hobby Box has an average value of $12. The guaranteed Relic AND Auto in an HTA box has an average value of $26.40. Using these numbers, and the group odds, we can at least figure out the value of a card from a particular group.
Lets assume that the values of cards within a Group are constant and that relative values are proportional to the card’s scarcity. I realize that this may be a stretch, but it’s all we’ve got for now. In this case, a Group A autograph is the scarcest, and most valuable. With 34 cards per subject it is worth 1.41 times more than a Group B card, of which there are 48 cards per subject. Using that logic, we can make another relative value equation for Autos:
A=1.41B=11.11C=29.79E=22.35F=34.5G
I do not know why there is no Group D breakout in the odds that I found online, so we’ll have to deal with what we’ve got.
Similarly, for Relics, where Group D is the scarcest at 197 cards per subject:
D=5.34C=1.3B=2.56A
There are 19,492 autograph cards and 20,911 relic cards (using only Highlights Autos/Relics and Commorative Patch relics for simplification). In other words, there is one relic card for every 1.07 autograph cards. Earlier, we calculated that there are 5,445,000 packs. In a Hobby Box 1/36 packs has either a relic or an auto. That means that 151,250 packs have either a relic or an auto.
Total=r+a
r=1.07a OR a=.935r
151,250=r+.935r=1.935r
r=78,165
a=.935r=73,084
Knowing how many relics and autos there are tell us that there is a 51.68% chance that the “hit” is a relic and a 48.32% chance that it is an auto. Almost there…
The Expected “Value” of our Auto is .4832*12= or $5.80 Let’s use the median instead of the mean to determine that the median card falls in Group F. If F=$5.80 and A=22.35F, then A=$129.63
Clearly, this is well below the $200 that Albert charges for an Autograph. There could be two reasons. The first, is that I don’t know what I’m doing mathematically and that I even ended up with the proper number of figures is a miracle in and of itself. That is the most likely probability. The other reason is that Topps is using Pujols to sell the product (he is on the box after all) and is willing to take a loss on the box to entice people to buy. This is what The Sportscard File has called a “loss leader.” It is a card that entices people to buy the product, but actually costs the manufacturer more money to produce than they expect to get back off that card.
You see, markets rarely lie. They tend to incorporate all of the available information to determine prices. Would you be surprised to see a 2008 Topps Pujols Autograph sell on eBay for $129.63? How about a Pujols Autograph #/34 for that amount? That sounds pretty darn accurate to me.
My point is, Topps has implicitly set an SRP of around $130 for this card, even though it costs them more to produce it. They make up for it by also inserting cards that have low SRPs (Group C is SRP’d at $4.35—sounds about right for the Lance Broadway auto I pulled from my box), and making the difference back as profit. Interestingly, the relic in the box has an Expected Value of $6.20. This may be due to the fact that the relic cards are almost all stars or semi-stars, whereas the autos can be quite obscure.
I’m not mathematically proficient enough to continue this to figure out how things change by guaranteeing both in the HTA box. I know that r+a=$26, but I kind of fall apart there. Feel free to take this and run with it.
Again, I could be wrong on all of this and I would love it if somebody could correct me or help on any of it, but it makes sense to me intuitively. Next time, IN MY FINAL INSTALLMENT, I’ll talk about how we can use this information for good instead of evil and finally explain how we, as bloggers, can save the world.
Thanks for making it through.
Sunday, January 18, 2009
The Value of Cards (Part III)
I lied. This post went up today and not yesterday. My apologies.
Part III: When Prices Rise Over Time
Parts I and II are available here and here
When information is scarce and prices haven’t stabilized, it is most common for prices to decline, as discussed extensively in Part II. In the majority of cases, waiting will yield lower prices, unless a stable “market price” has already been set, in which case prices will stay the same. It is important to note that this effect does not necessarily hold true for all cards. Rather, only cards that are capable of commanding high prices will follow this logic. In low price ranges, the psychological barrier of spending an extra dollar or two is not large enough to prevent people from spending a little more than their perceived value just to win. With high prices, some people will try to get the card cheaply, some will spend moderately and some will eventually spend a lot to win the card. Ultimately, the price will settle at a more moderate range where the bulk of collectors would value it. This stabilization point is the point where the two lines on our graph cross, known as the equilibrium (labeled true market value). Here's our graph from the previous post to illustrate:
However, there is another scenario that can arise in which waiting will lead to substantially higher costs. I will call this the Andrew Miller Paradox. In 2007, Topps released rookie variations for a handful of cards in their Series 1 set. Andrew Miller, Delmon Young and Troy Tulowitzki, among others. The Andrew Miller card showed him posed, instead of delivering a pitch like his normal card. It became known as #15b. Here are the two side by side with the variation on the right.
Now, this card came out right when I got back into collecting. I saw it on eBay when Topps series 1 was released and the two cards, bundled together sold for around $10. A month or so later, I saw another one on eBay with a starting price of around $40. Later there was another one at about $40 with a few days to go. Other sightings from members of the Detroit Sports Collectors forum saw prices get as high as $75 and $175! So what happened here?
Well, asymmetric information reared its ugly head again. When this card was first released, people knew that it was short printed, but they didn’t know how short. Prices were inflated above normal card value. However, it quickly became known that these prices were SUPER short printed. The forums came alive with rumors of 1:3400 Wal Mart Packs, Less than 1 per case, etc. All of a sudden this card, which people had apprehensively bid on initially, was known to be extremely rare. With all the information out in the open, the price exploded. Topps set collectors, perhaps the largest subset of collectors, clamored to get it, leaving Tigers and Miller collectors in the dust, although still willing to pony up for the card. In this case, the price may have stabilized at a persistently high level, or it may have been high up until the point that these rare cards disappeared from the market. Either way, the price of this card never did go down and remains an impossible card to find to this day. Graphically the series of events looks like this:
In the first graph we see a “true market value” based on the information available to consumers. However, once more information is revealed, and the scarcity of the card known, the graph changes. The upward sloping graph (supply curve) shifts to the left, reflecting a lower supply than originally thought. This creates a new “true market value” at a much higher level, given the fewer number of cards in the market.
Contrast the Miller case with a more famous short print from the same release, the Derek Jeter w/Bush and Mantle card. With collectors still jittery over the Alex Gordon and Alay Soler releases in 2006 Topps (Beckett wrote a good article that provided much needed information on the scarcity of the card—clearly with intelligent economists on staff), and with the Jeter card receiving tremendous publicity, prices started out sky-high. However, as the scarcity of the card became better known, prices fell—as you would expect in a traditional scenario. Graphically:
In this scenario, consumers thought that the card had a lower supply than it actually did. As you may remember, the market was initially confused about whether this was a gimmick or a joke that wasn’t caught. This confusion bred high initial prices. Once it became clear that it was a gimmick, and that the card was more common than originally thought, the supply curve shifted to the right, lowering the price. (You could also argue that demand shifted left, lowering prices further, once the card was revealed as a gimmick, turning some people off. It is important to note that while actual suppy didn’t change, the perceived supply in the market, based on the information available did change, causing the price fluctuation. While this isn’t technically asymmetric information, which assumes that either buyers or sellers exploit the other by having information that only they know, this general disinformation has the same effect for our purposes).
So how do the cases of price inflation discussed here and deflation, from the previous post, help us determine a final market price? The key is information. Looking back at the original post from Dinged Corners, we see the Babe Ruth “hair” card. The seller has no idea how much that card is worth. Neither do you. Nobody does. Why? Because only one of those cards exists, and there are no comparable substitutes out there. This is not a printing plate “1 of 1” where there are other printing plates from the same player and other players that can help set a market price (for printing plates), this has a hair from Babe freaking Ruth. Now, if this were just an autograph card, we could set a price on it based on the going rate for Babe Ruth signature cards or, failing that, Babe Ruth signatures on other items. The issue is the hair. Perhaps if cloning were up and running then someone could evaluate how much a modern day Babe Ruth would earn as a professional baseball player, subtract the cost of the cloning procedure and the cost of raising him over the course of 18 years until he could get drafted out of high school and reach a final number for having Babe Ruth as a son. Otherwise, what is the point of the hair? Because it’s cool? Last I checked, you can’t put a price on cool (I should know—Heyo!) So, instead we are left with a card that is so potentially valuable that it has no value because it can’t sell. The only way to find the price of that card is to put it up for auction and see where it ends up. Meanwhile, Jeter and Matsuzaka cards are selling within narrow-ish ranges, although some buyers are getting better prices than others. Clearly, there is an established market for these players that has helped set a base price for their autographed cards, allowing for fluctuations based on set, condition, autograph quality etc. Price stabilization occurs when all of the information about the card is known. It doesn’t need to be perfect (e.g. the card can be relatively common or relatively rare) but there needs to be some heuristic that buyers can follow. If there isn’t, we get crazy Armando Galarraga and Andrew Milller situations until more information is discovered.
So that, my friends, is how the eBay market works to price cards. I hope that made sense for everyone. But wouldn’t it be interesting to know what the companies thought the cards would be worth? Wouldn’t it be easier if there was an SRP for cards like this, especially the really rare ones?
I hypothesize that there actually is. Through a combination of pack prices and the odds released by manufacturers, we can actually deduce the manufacturer’s SRP for almost EVERY CARD in a release! In the next post, I will attempt to prove that hypothesis and use it in conjunction with our newfound knowledge of the dynamics of eBay to determine how we can purchase on eBay more effectively and, how we, as bloggers, can save the world.
Part III: When Prices Rise Over Time
Parts I and II are available here and here
When information is scarce and prices haven’t stabilized, it is most common for prices to decline, as discussed extensively in Part II. In the majority of cases, waiting will yield lower prices, unless a stable “market price” has already been set, in which case prices will stay the same. It is important to note that this effect does not necessarily hold true for all cards. Rather, only cards that are capable of commanding high prices will follow this logic. In low price ranges, the psychological barrier of spending an extra dollar or two is not large enough to prevent people from spending a little more than their perceived value just to win. With high prices, some people will try to get the card cheaply, some will spend moderately and some will eventually spend a lot to win the card. Ultimately, the price will settle at a more moderate range where the bulk of collectors would value it. This stabilization point is the point where the two lines on our graph cross, known as the equilibrium (labeled true market value). Here's our graph from the previous post to illustrate:
 |
| From Grand Cards |
However, there is another scenario that can arise in which waiting will lead to substantially higher costs. I will call this the Andrew Miller Paradox. In 2007, Topps released rookie variations for a handful of cards in their Series 1 set. Andrew Miller, Delmon Young and Troy Tulowitzki, among others. The Andrew Miller card showed him posed, instead of delivering a pitch like his normal card. It became known as #15b. Here are the two side by side with the variation on the right.
Now, this card came out right when I got back into collecting. I saw it on eBay when Topps series 1 was released and the two cards, bundled together sold for around $10. A month or so later, I saw another one on eBay with a starting price of around $40. Later there was another one at about $40 with a few days to go. Other sightings from members of the Detroit Sports Collectors forum saw prices get as high as $75 and $175! So what happened here?
Well, asymmetric information reared its ugly head again. When this card was first released, people knew that it was short printed, but they didn’t know how short. Prices were inflated above normal card value. However, it quickly became known that these prices were SUPER short printed. The forums came alive with rumors of 1:3400 Wal Mart Packs, Less than 1 per case, etc. All of a sudden this card, which people had apprehensively bid on initially, was known to be extremely rare. With all the information out in the open, the price exploded. Topps set collectors, perhaps the largest subset of collectors, clamored to get it, leaving Tigers and Miller collectors in the dust, although still willing to pony up for the card. In this case, the price may have stabilized at a persistently high level, or it may have been high up until the point that these rare cards disappeared from the market. Either way, the price of this card never did go down and remains an impossible card to find to this day. Graphically the series of events looks like this:
 |
| From Grand Cards |
In the first graph we see a “true market value” based on the information available to consumers. However, once more information is revealed, and the scarcity of the card known, the graph changes. The upward sloping graph (supply curve) shifts to the left, reflecting a lower supply than originally thought. This creates a new “true market value” at a much higher level, given the fewer number of cards in the market.
Contrast the Miller case with a more famous short print from the same release, the Derek Jeter w/Bush and Mantle card. With collectors still jittery over the Alex Gordon and Alay Soler releases in 2006 Topps (Beckett wrote a good article that provided much needed information on the scarcity of the card—clearly with intelligent economists on staff), and with the Jeter card receiving tremendous publicity, prices started out sky-high. However, as the scarcity of the card became better known, prices fell—as you would expect in a traditional scenario. Graphically:
 |
| From Grand Cards |
In this scenario, consumers thought that the card had a lower supply than it actually did. As you may remember, the market was initially confused about whether this was a gimmick or a joke that wasn’t caught. This confusion bred high initial prices. Once it became clear that it was a gimmick, and that the card was more common than originally thought, the supply curve shifted to the right, lowering the price. (You could also argue that demand shifted left, lowering prices further, once the card was revealed as a gimmick, turning some people off. It is important to note that while actual suppy didn’t change, the perceived supply in the market, based on the information available did change, causing the price fluctuation. While this isn’t technically asymmetric information, which assumes that either buyers or sellers exploit the other by having information that only they know, this general disinformation has the same effect for our purposes).
So how do the cases of price inflation discussed here and deflation, from the previous post, help us determine a final market price? The key is information. Looking back at the original post from Dinged Corners, we see the Babe Ruth “hair” card. The seller has no idea how much that card is worth. Neither do you. Nobody does. Why? Because only one of those cards exists, and there are no comparable substitutes out there. This is not a printing plate “1 of 1” where there are other printing plates from the same player and other players that can help set a market price (for printing plates), this has a hair from Babe freaking Ruth. Now, if this were just an autograph card, we could set a price on it based on the going rate for Babe Ruth signature cards or, failing that, Babe Ruth signatures on other items. The issue is the hair. Perhaps if cloning were up and running then someone could evaluate how much a modern day Babe Ruth would earn as a professional baseball player, subtract the cost of the cloning procedure and the cost of raising him over the course of 18 years until he could get drafted out of high school and reach a final number for having Babe Ruth as a son. Otherwise, what is the point of the hair? Because it’s cool? Last I checked, you can’t put a price on cool (I should know—Heyo!) So, instead we are left with a card that is so potentially valuable that it has no value because it can’t sell. The only way to find the price of that card is to put it up for auction and see where it ends up. Meanwhile, Jeter and Matsuzaka cards are selling within narrow-ish ranges, although some buyers are getting better prices than others. Clearly, there is an established market for these players that has helped set a base price for their autographed cards, allowing for fluctuations based on set, condition, autograph quality etc. Price stabilization occurs when all of the information about the card is known. It doesn’t need to be perfect (e.g. the card can be relatively common or relatively rare) but there needs to be some heuristic that buyers can follow. If there isn’t, we get crazy Armando Galarraga and Andrew Milller situations until more information is discovered.
So that, my friends, is how the eBay market works to price cards. I hope that made sense for everyone. But wouldn’t it be interesting to know what the companies thought the cards would be worth? Wouldn’t it be easier if there was an SRP for cards like this, especially the really rare ones?
I hypothesize that there actually is. Through a combination of pack prices and the odds released by manufacturers, we can actually deduce the manufacturer’s SRP for almost EVERY CARD in a release! In the next post, I will attempt to prove that hypothesis and use it in conjunction with our newfound knowledge of the dynamics of eBay to determine how we can purchase on eBay more effectively and, how we, as bloggers, can save the world.
Wednesday, January 14, 2009
The Value of Cards (Part II)
Part II: Why Prices Go Down Over Time
My first post, available here was intended to introduce the concept of Consumer Surplus and to drive home the point that every collector values individual cards/products differently. I know that this conclusion seems obvious. Bear with me, as it is the crux of the entire secondary card market that is primarily driven through eBay.
Unlike a traditional market, in which a producer like Topps or Upper Deck tells us how much a pack of cards is worth through Suggested Retail Prices, eBay is a market based on Auctions in which, by definition, the highest bidder wins. This can lead to a number of peculiar results, which is, in fact, what led me to begin on this series in the first place.
At its core, the “value” of a particular card can adjust in accordance with two mechanisms, ultimately resulting in Price Stabilization. This stable price represents the true market value of the card, or, how much the card is actually worth. It is worth noting, that the value of cards can change over time. This was as true in a pre-eBay era as it is now and can be related to the desirability of a particular player, or set or the addition of information regarding the card’s scarcity etc. eBay has simply helped make this process simpler, by providing real-time price feedback and card information that was previously unknown to the collector.
Two mechanisms eventually lead to price stabilization on eBay, and they should be familiar to all of us. Deflation (declining price) and Inflation (ascending price). I will tackle them separately in the next two posts.
Deflation: The Curious Case of Armando Galarraga
In 2008, Topps guaranteed a game used card in each Series 2 and U&H $20 blaster from Target. Although odds of pulling a particular card were available on the side of the box, this information was not available to anyone who didn’t purchase a blaster themselves. One of these cards was a relic card of Detroit Tigers rookie Armando Galarraga.
There are a series of groups of people who would potentially be the “end user” for this card (ie: want this card for their collection): Detroit Tigers Collectors (esp. Topps Tigers collectors), Armando Galarraga Collectors, Topps Master Set collectors, Game Used collectors and Rookie Collectors, for example.
We can roughly order which groups would desire the card the most: Galarraga collectors and Tigers collectors would be on top, followed by Master set, GU and RC collectors. The logic is that there are few substitutes for Topps Tigers and Galarraga collectors, whereas the Master set collector has other cards from the same set to chase and the GU and Rookie Collectors have other cards from other sets to chase.
By this logic, we can make a simplifying assumption that Tigers/Galarraga collectors would pay the most for this card, followed by the other groups, respectively. Let’s take a look at a modification on yesterday’s graph:
Just like yesterday’s graphic, buyers on the left of the curve value the card more highly than buyers further to the right. If sold at the True Market Value (equilibrium point) they would be rewarded with a large consumer surplus (feel like they got a good deal). In this case, the “price” of the card is unknown without an SRP. Since nobody tells us how much a card is worth, it is up to us to figure it out!
Clearly, each collector’s individual valuation of a card will go a long way towards determining a final market price. If only it were that simple. As much as we decry the abundance of serial numbered cards as a way to create artificial scarcity and increase prices (it is, and it does) it removes one major barrier from achieving an efficient outcome: Information Asymmetry.
I know that a card #/99 only has 99 copies. You know that too. So does everyone that sees the card or views the listing. What I don’t know, is how common an unnumbered card is when it appears on eBay (notice, that “p” is not the only unknown in the above graphic, “q” is too!). I claim that this Information Asymmetry is THE SOURCE of almost all price fluctuations that we see on eBay prior to achieving price stabilization. As humans, we need information and context to help us make decisions. When there is none the outcome is very erratic indeed. And that brings us back to Armando…
For weeks after its existence was discovered, people like me and the folks over at the Detroit Sports Collectors Forum scoured eBay for this Armando Galarraga relic card. Even after returning from card shows, no Armando could be found. Finally, one appeared on eBay. After a furious last hour it sold for $21—that’s right, the guaranteed card from a $20 blaster. In the next few weeks, two more appeared and sold for $21-23. The buyer of the third gave this justification:
A month later, two more of these cards have ended up on eBay. The 4th sold for $13. The 5th sold for about $8. So what happened here? In a case of textbook economics, the people who valued the cards the most won the first copies, albeit at a relatively high cost. It is no coincidence that at least two of them were members of the Detroit Sports Collectors, a group that we judged would value the cards the most. After those initial cards were gone, people with more moderate valuations started winning, resulting in major price reductions. The last card yielded the first sensical result. By selling at $8, the card was now cheaper than a Gold Parallel version of the card #/99. While the price may not have stabilized yet (a search of "retail relics" on eBay as of 1/14/09 shows four cards priced at or below $0.99 and buy it now prices ranging from $2-5) we can clearly see how information asymmetry exploited the individual values of collectors who valued that card highly for their collection. Although they were left with little or no consumer surplus, they did win the card and walked away happy.
That is what eBay is designed to do. As an auction format, it is designed to make you bid up to your maximum value for a card. It is no coincidence that eBay actually instructs you to do this. If everyone bid their maximum value for a card, then the person who values the card the most would get it. That is an efficient outcome, although that is not always what happens. In a scenario like the one we just discussed, this can lead to high prices at first, which gradually lower and stabilize—something that we all have had experience with.
Since this is already very long, I will stop there. In subsequent posts, I will discuss a situation in which the price of a card will get more expensive the longer you wait and (finally) how we can determine what a card is actually “worth.” I will also explore ways to exploit the system, how knowing all of this can help you make important purchasing decisions (of packs too!) and how we, as bloggers, can help save the world.
Note: I still need this card for my collection, so if anybody has it let me know!
My first post, available here was intended to introduce the concept of Consumer Surplus and to drive home the point that every collector values individual cards/products differently. I know that this conclusion seems obvious. Bear with me, as it is the crux of the entire secondary card market that is primarily driven through eBay.
Unlike a traditional market, in which a producer like Topps or Upper Deck tells us how much a pack of cards is worth through Suggested Retail Prices, eBay is a market based on Auctions in which, by definition, the highest bidder wins. This can lead to a number of peculiar results, which is, in fact, what led me to begin on this series in the first place.
At its core, the “value” of a particular card can adjust in accordance with two mechanisms, ultimately resulting in Price Stabilization. This stable price represents the true market value of the card, or, how much the card is actually worth. It is worth noting, that the value of cards can change over time. This was as true in a pre-eBay era as it is now and can be related to the desirability of a particular player, or set or the addition of information regarding the card’s scarcity etc. eBay has simply helped make this process simpler, by providing real-time price feedback and card information that was previously unknown to the collector.
Two mechanisms eventually lead to price stabilization on eBay, and they should be familiar to all of us. Deflation (declining price) and Inflation (ascending price). I will tackle them separately in the next two posts.
Deflation: The Curious Case of Armando Galarraga
In 2008, Topps guaranteed a game used card in each Series 2 and U&H $20 blaster from Target. Although odds of pulling a particular card were available on the side of the box, this information was not available to anyone who didn’t purchase a blaster themselves. One of these cards was a relic card of Detroit Tigers rookie Armando Galarraga.
There are a series of groups of people who would potentially be the “end user” for this card (ie: want this card for their collection): Detroit Tigers Collectors (esp. Topps Tigers collectors), Armando Galarraga Collectors, Topps Master Set collectors, Game Used collectors and Rookie Collectors, for example.We can roughly order which groups would desire the card the most: Galarraga collectors and Tigers collectors would be on top, followed by Master set, GU and RC collectors. The logic is that there are few substitutes for Topps Tigers and Galarraga collectors, whereas the Master set collector has other cards from the same set to chase and the GU and Rookie Collectors have other cards from other sets to chase.
By this logic, we can make a simplifying assumption that Tigers/Galarraga collectors would pay the most for this card, followed by the other groups, respectively. Let’s take a look at a modification on yesterday’s graph:
Just like yesterday’s graphic, buyers on the left of the curve value the card more highly than buyers further to the right. If sold at the True Market Value (equilibrium point) they would be rewarded with a large consumer surplus (feel like they got a good deal). In this case, the “price” of the card is unknown without an SRP. Since nobody tells us how much a card is worth, it is up to us to figure it out!Clearly, each collector’s individual valuation of a card will go a long way towards determining a final market price. If only it were that simple. As much as we decry the abundance of serial numbered cards as a way to create artificial scarcity and increase prices (it is, and it does) it removes one major barrier from achieving an efficient outcome: Information Asymmetry.
I know that a card #/99 only has 99 copies. You know that too. So does everyone that sees the card or views the listing. What I don’t know, is how common an unnumbered card is when it appears on eBay (notice, that “p” is not the only unknown in the above graphic, “q” is too!). I claim that this Information Asymmetry is THE SOURCE of almost all price fluctuations that we see on eBay prior to achieving price stabilization. As humans, we need information and context to help us make decisions. When there is none the outcome is very erratic indeed. And that brings us back to Armando…
For weeks after its existence was discovered, people like me and the folks over at the Detroit Sports Collectors Forum scoured eBay for this Armando Galarraga relic card. Even after returning from card shows, no Armando could be found. Finally, one appeared on eBay. After a furious last hour it sold for $21—that’s right, the guaranteed card from a $20 blaster. In the next few weeks, two more appeared and sold for $21-23. The buyer of the third gave this justification:
I "won" the other auction today for $21 and change. Way more than I wanted to spend on this card but it's better than a wild gamble on a $20 blaster box and ending up with a bunch of common doubles that I don't need.
This new auction may be "yet another", but that's still a grand total of only 4 of these cards (3 white border, 1 gold [sold for $9.99-ed.]) that I've ever seen, leading me to believe it's a very short print. Perhaps just trying to make myself feel better about spending $21 but at least it's one step closer to closing out 2008
A month later, two more of these cards have ended up on eBay. The 4th sold for $13. The 5th sold for about $8. So what happened here? In a case of textbook economics, the people who valued the cards the most won the first copies, albeit at a relatively high cost. It is no coincidence that at least two of them were members of the Detroit Sports Collectors, a group that we judged would value the cards the most. After those initial cards were gone, people with more moderate valuations started winning, resulting in major price reductions. The last card yielded the first sensical result. By selling at $8, the card was now cheaper than a Gold Parallel version of the card #/99. While the price may not have stabilized yet (a search of "retail relics" on eBay as of 1/14/09 shows four cards priced at or below $0.99 and buy it now prices ranging from $2-5) we can clearly see how information asymmetry exploited the individual values of collectors who valued that card highly for their collection. Although they were left with little or no consumer surplus, they did win the card and walked away happy.
That is what eBay is designed to do. As an auction format, it is designed to make you bid up to your maximum value for a card. It is no coincidence that eBay actually instructs you to do this. If everyone bid their maximum value for a card, then the person who values the card the most would get it. That is an efficient outcome, although that is not always what happens. In a scenario like the one we just discussed, this can lead to high prices at first, which gradually lower and stabilize—something that we all have had experience with.
Since this is already very long, I will stop there. In subsequent posts, I will discuss a situation in which the price of a card will get more expensive the longer you wait and (finally) how we can determine what a card is actually “worth.” I will also explore ways to exploit the system, how knowing all of this can help you make important purchasing decisions (of packs too!) and how we, as bloggers, can help save the world.
Note: I still need this card for my collection, so if anybody has it let me know!
Tuesday, January 13, 2009
The Value of Cards: Part I-Traditional Markets
A series of interesting eBay experiences over the last few weeks have prompted me to write about something that is close to all of our hearts. Card Pricing. Of course, the wonderful Dinged Corners beat me to the punch. Taking their cue, I thought that I would post the first in a series on card pricing and eBay. I will try to keep the posts relatively straightforward, and I will try to use some theoretical analysis to back up my claims. IF MY ASSUMPTIONS OR METHODS ARE WRONG, PLEASE CORRECT ME. I’m a little rusty on my statistics and such, so if I’m incorrect, please let me know and I’ll make a correction. Onward…
Cards, intrinsically, have no value. We have all heard that argument before. They are cardboard pictures and ink. In a sense, that is true. In another, more accurate sense, cards do have some value—the value that we give to them through the same market forces that drive everything else in the country: Supply and Demand.
Example. Keep in mind that all of the numbers in this example are fictitious:
Topps manufactures cards that it intends to sell for $1.99 per pack (p). At that price, they expect to sell 500,000 packs of cards (q). This is graphically displayed in a typical supply and demand curve:
Now, say Topps decides that they are going to increase their prices to $2.99 per pack. Assuming nothing has changed, they will only sell 300,000 packs (losing substantial market share to Upper Deck). At this price, only people who value a pack of Topps cards at $2.99 or higher will buy.
Similarly, if they lowered their price to $.99 per pack, they would increase sales to 650,000 packs. At this price, people who weren’t willing to buy a pack at $1.99 will enter the market.
Let’s go back to the first scenario, known as the equilibrium case. You can view the downward sloping line (Demand Curve) as a series of 500,000 points, one for each pack of cards sold. The first (highest) point is sold to somebody who values a pack of Topps cards VERY HIGHLY. For fun, let’s call that person JayBee. The last (lowest) point is indicative of somebody who sees almost no value in Topps cards. Let’s call that person Chris. At the intersection, is the person who feels as though they will get exactly what they expect out of a Topps pack, nothing more, nothing less. Let’s call him Joe.
If there were only one pack available for sale, and no price had been set, JayBee would be willing to pay $10 for it. However, packs only cost $1.99. That means that JayBee is getting $8.01 of additional benefit without having to pay for it. That is his consumer surplus. Meanwhile, at the equilibrium point, Joe is paying $1.99 for something that he values at $1.99—his consumer surplus is zero.
So, why is this important? Aren’t we supposed to be talking about card valuation here? Yes. Yes we are. In the world of packs (and most other consumer goods), the “market” relies on Producers like Topps setting the price of their goods. This is all done with a complex pricing mechanism that calculates costs and profits etc. This is your Suggested Retail Price (SRP).
As we know all too well, there are no SRPs for individual cards, everything is market driven. However, the basic theory of consumer surplus still holds--and that is what gives you the impression of getting a "good deal" or the sense that a card is overpriced. In years past, there was no “global market” for baseball cards. You were relatively restricted to the card shops and card shows in your area. With limited information for consumers, Beckett valuations filled the role of market data. I will not begin to enter into the heated Beckett fray that has erupted recently, I’m just giving context as to why Beckett was so important for so long. However, a market emerged in the last decade that provides real time feedback on pricing and valuation. That market, as you well know, is eBay.
In my next post, I will discuss how eBay works as a market and how its structure affects you, the collector.
Cards, intrinsically, have no value. We have all heard that argument before. They are cardboard pictures and ink. In a sense, that is true. In another, more accurate sense, cards do have some value—the value that we give to them through the same market forces that drive everything else in the country: Supply and Demand.
Example. Keep in mind that all of the numbers in this example are fictitious:
Topps manufactures cards that it intends to sell for $1.99 per pack (p). At that price, they expect to sell 500,000 packs of cards (q). This is graphically displayed in a typical supply and demand curve:
Now, say Topps decides that they are going to increase their prices to $2.99 per pack. Assuming nothing has changed, they will only sell 300,000 packs (losing substantial market share to Upper Deck). At this price, only people who value a pack of Topps cards at $2.99 or higher will buy.
Similarly, if they lowered their price to $.99 per pack, they would increase sales to 650,000 packs. At this price, people who weren’t willing to buy a pack at $1.99 will enter the market.
Let’s go back to the first scenario, known as the equilibrium case. You can view the downward sloping line (Demand Curve) as a series of 500,000 points, one for each pack of cards sold. The first (highest) point is sold to somebody who values a pack of Topps cards VERY HIGHLY. For fun, let’s call that person JayBee. The last (lowest) point is indicative of somebody who sees almost no value in Topps cards. Let’s call that person Chris. At the intersection, is the person who feels as though they will get exactly what they expect out of a Topps pack, nothing more, nothing less. Let’s call him Joe.
If there were only one pack available for sale, and no price had been set, JayBee would be willing to pay $10 for it. However, packs only cost $1.99. That means that JayBee is getting $8.01 of additional benefit without having to pay for it. That is his consumer surplus. Meanwhile, at the equilibrium point, Joe is paying $1.99 for something that he values at $1.99—his consumer surplus is zero.
So, why is this important? Aren’t we supposed to be talking about card valuation here? Yes. Yes we are. In the world of packs (and most other consumer goods), the “market” relies on Producers like Topps setting the price of their goods. This is all done with a complex pricing mechanism that calculates costs and profits etc. This is your Suggested Retail Price (SRP).
As we know all too well, there are no SRPs for individual cards, everything is market driven. However, the basic theory of consumer surplus still holds--and that is what gives you the impression of getting a "good deal" or the sense that a card is overpriced. In years past, there was no “global market” for baseball cards. You were relatively restricted to the card shops and card shows in your area. With limited information for consumers, Beckett valuations filled the role of market data. I will not begin to enter into the heated Beckett fray that has erupted recently, I’m just giving context as to why Beckett was so important for so long. However, a market emerged in the last decade that provides real time feedback on pricing and valuation. That market, as you well know, is eBay.
In my next post, I will discuss how eBay works as a market and how its structure affects you, the collector.
Subscribe to:
Posts (Atom)