Baseball Card Pricing Model: a Demonstration with Well-Known Players
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Visions in Leisure and Business Volume 21 Number 1 Article 6 2003 Baseball Card Pricing Model: A Demonstration with Well-known Players Robert F. Mulligan Western Carolina University A. J. Grube Western Carolina University Stephen B. Jarrell Western Carolina University Follow this and additional works at: https://scholarworks.bgsu.edu/visions Recommended Citation Mulligan, Robert F.; Grube, A. J.; and Jarrell, Stephen B. (2003) "Baseball Card Pricing Model: A Demonstration with Well-known Players," Visions in Leisure and Business: Vol. 21 : No. 1 , Article 6. Available at: https://scholarworks.bgsu.edu/visions/vol21/iss1/6 This Article is brought to you for free and open access by the Journals at ScholarWorks@BGSU. It has been accepted for inclusion in Visions in Leisure and Business by an authorized editor of ScholarWorks@BGSU. BASEBALL CARD PRICING MODEL: A DEMONSTRATION WITH WELL-KNOWN PLAYERS BY DR. ROBERT F. MULLIGAN, ASSISTANT PROFESSOR DEPARTMENT OF BUSINESS COMPUTER INFORMATION SYSTEMS AND ECONOMICS COLLEGE OF BUSINESS DR. A.J. GRUBE, ASSISTANT PROFESSOR DEPARTMENT OF HEALTH AND HUMAN PERFORMANCE COLLEGE OF EDUCATION AND ALLIED PROFESSIONS AND DR. STEPHEN B. JARRELL, PROFESSOR DEPARTMENT OF MANAGEMENT AND INTERNATIONAL BUSINESS COLLEGE OF BUSINESS WESTERN CAROLINA UNIVERSITY CULLOWHEE, NORTH CAROLINA 28723 ABSTRACT issued during the same season, race had a significant positive effect on price for black A simple hedonic pricing model is devel players. Batting average and number of oped for baseball cards, of the type often World Series appearances had significant used successfully to model prices for art positive impacts on price, but surprisingly, works. The model is estimated for a dataset rookie cards tended to be worth relatively of twelve well-known players observed at less than non-rookie cards. Similarly unex eight points in time over a span of twenty pected findings with respect to players' years. Dummy variables are used to capture death and elevation to the Hall of Fame may various relevant characteristics of the player result from trying to estimate too many or card. This model was estimated sepa characteristics simultaneously on a limited rately for two different approaches or as dataset. Results suggest famous players' sumptions about rates of return. Estimates cards generally are extremely attractive in perform extremely well, explaining most vestment instruments. differences· among baseball card prices for the cards in the sample. Among extrinsic variables that represent specific players and card characteristics that differentiate cards 30 INTRODUCTION a discussion of the data used, presentation of the empirical results, and finally the conclu The economic literature on appreciation of sion. non-financial investment assets has gener ally found low rates of return accompanied by high risk. Assets studied have included LITERATURE real estate, artworks, wines, and sports memorabilia. Sports memorabilia comprise This section discusses some of the relevant an especially promising subject for further economic literature on pricing sports memo study. One essential feature rendering rabilia and other non-financial investment sports memorabilia more favorable subjects assets, such as artwork. Stoller (10) pro is the relative homogeneity of collectibles vides a valuable analysis of the Fleer v. such as baseball cards, a feature clearly not Topps antitrust case as well as a discussion shared by artwork or real estate. of the underlying economics of the baseball card business. The loss of Topps' monopoly All cards of a certain issue should have their power in 1980 and the introduction of com-. value determined by characteristics intrinsic petition ( 10, p. 23) may have caused the col to the card, such as a card's age, condition, lapse of a speculative bubble in card prices. and scarcity, and characteristics extrinsic to Stoller ( 10, p. 19) documents a 31.6 percent the card, such as the particular player's re annual return on Topps cards. cords, fame, and popularity. Intrinsic char acteristics are generally properties of the Nardinelli and Simon (7) and Andersen and whole issue and are shared by all cards of a La Croix (2) both found that a player's race given year printed by a given manufacturer, significant} y affected the price paid for assuming that equal numbers of each player baseball cards on the secondary market. were printed. Obscure player's cards will be These studies focus on the secondary market sought to complete sets of a given issue, and for sports memorabilia to isolate consumer famous or star player's cards will face addi discrimination from co-worker and em tional demand to complete sets or enhance ployer discrimination. McGarrity, Palmer, partial sets of star player or team cards. and Poitras ( 6) found little evidence of racial discrimination in the market for baseball This paper develops a simple hedonic pric cards. They used a dataset with constant ing model for baseball cards, of the type of supply, where effects from speculative de ten used successfully to model prices for mand are largely removed by considering artworks. We estimate this model with an only retired players. Using a variety of illustrative sample of card prices for several econometric specifications allowed them to different years. The results are used to assess the robustness of their results. Fort demonstrate the construction of price indices and Gill (5) study racial discrimination in (i.e. rates-of-return) for baseball cards for baseball card markets using continuous, this particular set of cards using two meth non-binary racial perceptions of market par ods. Finally, we extract specific values that ticipants, as reported by surveys. They find individual player characteristics contribute evidence of discrimination against black and to the value of a card. The paper is organ Hispanic hitters and against black pitchers, ized as follows: a review of the literature is but not Hispanic pitchers. The mixed results followed by a development of the hedonic leave no clear indication of the impact of pricing model and consequent price indices, racial discrimination on baseball card prices. 31 The literature on pricing artwork has signifi MODEL cant implications for sports memorabilia markets. Ekelund, Ressler, and Watson- ( 4) Baseball cards appreciate in value in a fash examine how an artist's death affects the ion similar to wine, though for different rea demand for that artist's work. They find a sons. The supply of cards of a particular clustered rise in the artwork's values imme brand, player, and year is limited to the diately around the time of the artist's death. number printed. Surviving copies appreciate This phenomenon has two implications for in value, as some are lost, destroyed, or de the sports memorabilia market. The supply cay in condition as time passes. This grad of baseball cards is effectively frozen for a ual diminution of the supply of cards is simi particular player when the player retires lar to what happens as vintage wines are from the game, rather than at death. Ancil consumed, mature forests are harvested for lary memorabilia, including autographs, and lumber, or petroleum deposits are pumped public appearances can continue to generate out of the ground. Unlike wines, baseball nostalgia and interest in a player, enhanced cards and other sports memorabilia do not by the player's death. acquire chemical changes as they age which improve their quality, and desirability. In Rengers and Velthuis (8) and Agnello and fact, the chemical changes to which sports Pierce_ ( 1) study determinants of artwork memorabilia are subject over time normally prices based on characteristics of the art detract fromtheir desirability, and collectors work, artist, and gallery. This approach attempt to prevent or delay chemical generalizes fairly readily to baseball cards, changes. which have characteristics attributable to the player, team, and year of issue. Reneboog Changes in demand also affect the prices of and Van Houtte (9) and Agnello and Pierce sports memorabilia. Demand for such ( 1) find that artworks significant! y underper memorabilia increases with interest in the form when compared with financial assets, particular sport or athlete, with interest in owing to the very high ris� of investing in the memorabilia for its own sake, and with art, the heterogeneity of artworks, high increased chances of return on them as in transactions costs, and high costs of insur vestment assets. Demand effects can occa ance, transportation, security, and resale. It sionally be negative, as documented for the is particularly worth noting that none of collapse of baseball card prices caused by these negative features generally applies to the end of monopoly pricing in 1980 ( 10, p. sports memorabilia. Baseball cards of a 23), an exceptional event in this market. given player, issue, and co·ndition are always non-unique, homogeneous assets. Sports memorabilia and athletes have unique characteristics as well. Though old baseball Clearly, researchers have laid much of the cards of comparable significance, condition, groundwork for estimating financial models and quality are generally more valuable than for investment in baseball cards. We build newer cards, the career performance and on this foundation of art models with re general fame of the player make a card more search on similar relevant factors for a lim desirable and therefore more valuable. All ited set of baseball cards. cards of a given issue had the same price when new, and appreciate over time. A rookie card of an average player appreciates much less than that of a better-known 32 player. A rookie card of a presumed hot season, and we assume they affect all cards prospect may appreciate rapidly early on, similarly, that is, at the average effect. To but plateau or even decline in value as the avoid multicollinearity, a single trend vari player's career fails to achieve its initial able or a related series of time dummy vari promise. Some players' cards are especially ables capture the effect of these intrinsic fac desirable due to tragically brief careers.