Sunk Costs in the Hobby Video

[raulus]

Any chance you are both right?

I would posit that when it comes to items that are abundantly available, and where there is similarly robust demand, they often sell like commodities, with prices that fall within a fairly tight range.

On the other hand, for items that are rare and difficult to find, especially where there is very thin demand, assuming the owner has no immediate financial pressure to sell, the market is ultimately whatever the seller is willing to accept, which is often going to be a function of the most aggressive buyer.

Naturally, not every item in the universe falls neatly into these two categories, so you're going to have lots of pieces that fall somewhere in-between, depending on the relative availability and demand for the item, with some a bit more on one end of the spectrum or the other. And over time, some items may even shift as relative demand for the item waxes and wanes.

Originally Posted by Leon

Nice analogies but I respectfully disagree about supply. It really just doesn't matter. If I have a unique card and there is no demand then the sales price will be low. That said, there are over 1000 Jordon's in a 10 holder (I believe)....but the demand is through the roof so it's valuable. Supply rarely has to do with price since demand will set the price. All in my humble opinion...

Quote:
Originally Posted by obcmac
While I agree with the discussion presented in the video, this analysis and discussion always seems to miss the key element of the market. There isn't one objective price for an individual card, but rather there are a group of buyers all with different valuations of the same card (aka, the good old demand curve). Dealers are buying in a competitive, but limited (due to time and information constraints) markets, and trying to reallocate to those with the highest valuation. A market clearing price isn't the "true price". A dealer will seek out individuals with highest willingness to pay and try to sell to them near their maximum. This is where supply matters a lot...89 UD Griffey, then you are going to get a price near the market clearing price since the selling market is competitive...cards with limited population can sell closer to the buyer's valuation instead of the underbidder valuation + 1 bid. A good business rule of thumb is to sell cards for more than you buy them for...and if you offer a dealer less than they paid, then it is often in the best interest of the dealer to wait until they find someone with a higher willingness to pay. So...if you paid $100 for your Kevin Seitzer rookie, holding out for $150 would be a sunk cost fallacy...but holding out for someone to pay a little more on a rare pre-war card isn't an example of the same error, even if one or two sales appear at lower levels.