Market Value

I’ve noted it before, but have recently been reminded, how good eBay (and by inference, I suppose, free markets) is at finding the ‘correct’ value for items. I’m referring specifically to items which are not (unduly) supply constrained, which is not the case for collectibles and the like – the items in question are generally mass-produced goods being resold, so excluding minor differences such as lost manuals or boxes, cosmetic scratches, and excluding actually broken items, the things being sold are almost identical.

The case in point is camera strobes (flash-guns) – I’m hoping to pickup a Speedlight of some kind, ideally an SB-800, but I figured an SB-600 or SB-28 would be perfectly adequate if I could find a ‘bargain’. Thanks to eBay, however, there are no bargains – the market value for the SB-800 is £190-200, and about £60-80 for the SB-28. There’s less SB-600s about, but it looks as if the price is about £140. Some items are entered at low starting bids, or with very high ‘buy it now’ prices, but the final selling price always seems to converge on the numbers above.

In one sense this is an obvious result – if other units are going for a given price, only a fool would bid even a couple of quid above that in any particular auction. Similarly, there’s enough buyers that any bargains get spotted, and bid on until the price reaches a fair one. What I find interesting is how much this mechanism relies on a whole bunch of assumptions about how the market operates – that all the units are really the same1, that there will always be more units to buy (and that supply will be evenly distributed over time), that more people will always want the units, that no one is buying up units to re-sell later, and so on.2

It’s interesting to consider how ever a minor distortion of the market would influence it – for example, if there was a notion that anyone was hoarding units, people would either walk away, or delay their purchases, or (if they had the capital) presumably start buying units elsewhere to sell when supply dries up. So, ho-hum, people with access to reserves of capital can easily distort markets, and small amounts of speculation can affect the entire market, as soon as buyers perceive that the current price is not based on the underlying commodity value.

I’ll stop now, before I get the urge to murder bankers.

  1. There are no ‘special’ units which work 20% better, for example []
  2. Being particularly cynical, it assumes no one is buying up the promise to buy large numbers of future units, then lending that promise to other people so they can sell it in the expectation of the price falling, before buying it back at a reduced price, and thus creating a plummeting price, despite the actually number of people who want to buy and sell units not actually changing. I am so glad I don’t work in banking, even writing the previous sentence made my brain ache. []
Posted Wednesday, November 26th, 2008 under geek, photography, toys.

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3 comments

  1. It’s not always so good at assessing value as anybody who bought Yahoo stocks in 1999, a British house in 2007 or Dutch tulips in 1637 could testify.

    People are very good at determining just how much *they* value goods, services and commodities, but when it comes to making investments in something that they intend to later sell, markets are not always so effective at finding the “correct” value.

  2. Well, hence my provisos about mass-produced, non-supply constrained items. Dutch tulips (in 1637), Yahoo shares and UK property all break those assumptions. Also, treating property as an investment, rather than somewhere to live, seems to be what got us into the current mess. Finding a nice flat in Edinburgh would have been much easier without all the buy-to-let folks inflating the market.

  3. Well, every market has its supply constrained to some extent, and being mass produced just means that there is a slightly higher degree of fungibility. Dutch tulips were/are effectively identical too, and while there are differences between houses, it’s still a relatively fungible market – they’re not all *that* different.

    The *real* difference between Nikon cameras and tulips, houses and yahoo stocks is that everybody Nikon cameras are only going to go down in value (electronics decrease in price faster than any other good) and everybody bought the other assets on the assumption that they would increase.

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