THE MARKET VALUE OF RARITY

Most theories of demand assume that consumers Value the characteristic s of products but are unconcerned with how many other consumers also c onsume the product. However, several theories of demand argue that con sumers can value the exclusivity of possessing a rare object. We test this implication on a particular collectible, rare coins. Our paper ex amines the case of coins of a given type and identical quality that ha ve mintages in different quantities. This allows us to exclude the com mon case in which rarity (or price itself) is an indicator of quality. For our sample, rarer coins command higher prices; rarity in the form of original mintage more strongly influences the market price than do es collectibility as represented by the rarest coins of each mint mark or year. We also point out that here may be other goods such as autom obiles, for which rarity may influence market demand. (C) 1998 Elsevie r Science B.V.