 Market value of rarity: A theory of fair value and evidence from rare baseball cardsSoroush Ghazi and Mark Schneider Journal of Economic Behavior & Organization, 2024, vol. 219, issue C, 318-339 Abstract: We investigate the market value of rarity theoretically and empirically. Prior studies find that the market value of rarity follows a power law, but this finding lacks a theoretical foundation. We provide a micro-foundation for this finding, demonstrating that the observed power law emerges in a competitive market where agents have rank-dependent utility preferences. The model leads to two new theoretical insights: (i) the rank of an item within a set of close substitutes and the quantity of that item known to exist are both natural measures of rarity, but rank is predicted to perform better; (ii) there is a systematic relationship between the estimated slope and intercept from a regression of log price on log rank. When we test the model on data from over 4000 auction records of rare baseball cards, we find that a regression with only log rank and grading company explains 60% of the variation in log price. Keywords: Rarity; Rank dependent utility; Baseball cards; Power laws; Zipf's law (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:219:y:2024:i:c:p:318-339 DOI: 10.1016/j.jebo.2024.01.016 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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