Over the recent holiday buying season, one of the best selling books was The Pokémon Collector's Value Guide : Secondary Market Price Guide and Collector Handbook by the Checkerbee Publishing Staff.

The book provides an extensive guide to the wide array of Pokémon cards (including English and Japanese versions as well as other sets) and provides an estimated price in US dollars for many of the cards.

Unlike the majority of kids in this country and Japan, I know nothing at all about Pokémon cards, the game, the TV shows, the movie, etc. But I do know a bit about supply and demand - and I suspect that millions of youngsters are getting a lesson in economics as they see the value of their cards drop through the floor.

Why drop?

Before the holidays, parents rushed out to buy every scrap of Pokémon merchandise they could get their hands on. All the cards that were purchased were then wrapped and saved until it was time to open the packages on Christmas morning (or on the other holidays of the season).

All of a sudden on December 26 there was a huge flood of Pokémon to the "marketplace" - in this case the market, rather than on Wall Street, is in the schools and on the playgrounds. In the language of economics the "supply" of cards has increased suddenly. Economists would call this a supply "shock" in the market for Pokémon cards.

Since there are now many more Pokémon cards we would expect the price of each card to drop - at every price there are more cards that people are trying to sell.

Could the price rise?

So the initial prediction might be a crash in the value of Pokémon cards. But wait, we only talked about a supply shock - couldn’t demand be affected also? If every kid that received a Pokémon gift over the holidays was already in the market, then probably not; but if a bunch of kids got their first set of cards over the holidays, then we might have a shift in demand as well.

The holiday season may have thus created a bunch of new "buyers" of the cards. If this is indeed the case, then the price of cards might actually rise!

Supply and Demand Curves

The above supply and demand effects can be illustrated with a tradition supply and demand graph. Figure 1 shows the initial equilibrium (see box below for definitions).

The Pokémon "Inflation"

I have talked about the price of Pokémon cards in dollar terms. But most youngsters are dollar-poor, and Pokémon-rich; what if all of the trading is done using only other Pokémon cards?

We need to make the distinction between the relative price of the cards (how many Pikachus must be given up for one Squirtle?) and the absolute price of all of the cards in terms of dollars. If kids don’t care about the dollar value, they will not notice any change in the relative price of the cards. But since the total supply went up, the price in dollar terms should fall.

Another way of saying this is that the value of the cards in terms of other, non-Pokémon, goods will fall. If kids use Pokémon cards a money, the result is a Pokémon inflation!

(At this point, the astute adults should notice the parallel with inflation and the supply of money.)

If indeed there has been a crash, hopefully the kids of the country will have at least learned a valuable lesson in supply and demand.

Links From the Web

For more Supply and demand see Ooo-micro.
Pokémon.com.

Supply and Demand for the grade school set. Over the recent holiday buying season, one of the best selling books... | Posted January 9, 2000 02:29 AM by John Irons