What Determines The Price Of A Stamp?

What determines the price of a stamp?

Basically, its 4 things; rarity, demand, survival rates and just plain lust. The 1st 2 are measureable while lust is very subjective and varies between individuals. Survival rates are a big unknown.

Q: What determines rarity? Less than 10 copies, less than 100 or just 1 known copy of a stamp in existence? Take the U.S. Scott #5 where around 35,000 stamps were issued and the U.S. Scott #21 where only around 3,500 were issued, a difference factor of 10. Yet the 5 is valued 20 time more than the 21.

Q: Survival rate? It's part of the rarity equation. Quantity issued is not the main factor in the formula for determining rarity, survival rate is. I don't know of a single data source of known survivors of rare stamps. Many auction houses keep track of items that have passed thru their auctions and new discoveries are found every year.

Q: What determines demand? The price difference of the #5 & #21 described above may be due to demand where the survival rate was just that bad on the #5. Demand is just that, the market has fewer stamps available to sell than people want to buy.

Q: What determines lust? Ask the person who bought the 1856 British Guiana 1¢ Magenta and paid $9,500,000 for it. And it's ugly as hell.

Bottom line, the price is determined by what a person is willing to spend. Who would have thought that the recent U.S. non inverted biplane sheet would have sold for $45,000? Another case of lust?

Art

What about condition for all other stamps besides the BG ?

1. Economics 101 says supply and demand determine pricing.
2. Reality states "whatever the market will bear" determines the pricing.
3. ebay says whatever the seller thinks he can get determines the pricing.
4. Scott's (and other catalog companies) set pricing determined by "your guess is as good as anyone.".

At some point 'perception' plays a big role in demand. It is clearly possible to influence 'demand' by slick marketing and hype if one has enough motivation to do so. Writing a book, article, or other ways to present the stamp (or collecting topic) can obviously increase demand. Organizations such as governmental postal systems spend large amounts of money on promoting stamps as investments and desirable. Beyond that there are also plenty of commercial organizations which do the same thing; think Franklin Mint. Their marketing and promotion efforts often influence demand (albeit often a shorter type of demand).

And I would also add that convenience can also play a role with demand. Take the car collecting hobby. Without question the best investment in the old car hobby is that of New Old Stock sheet metal parts (fenders, hoods, doors, etc.) because the two primary factor as working in opposite directions. Supply is constantly shrinking (limited quantities originally made) while the demand is always growing (rust, accidents, etc.). Yet few old car dealers want to handle big, bulky hard to store/ship sheet metal parts. It is far easier to deal in shiny seductive hood ornaments or accessories. With stamp dealers, it is more convenience to inventory/sell higher quality single rare stamps than it is to deal with something like postal stationery.
Don

If there are fewer stamps available to sell than people want to buy, that's a supply problem, not a demand problem. Demand relates to what people are will to pay, not how many there are to buy. That (willingness to pay) is what explains this:


Of course rarity, or lack of supply, can be a cause for demand, or willingness to pay. But not rarity itself. I have some covers that are extremely rare: they are "one-off" creations of my own I created at the time of the release of 3783 (First Powered Flight Centennial). But they are probably not worth much. I'm not a known cachet maker, so there is no demand for what I created. Take a rock, and paint it green. It may be the only green rock of its kind in the world. Rare indeed. And worthless.

Supply is a factor in the price of something. But it doesn't matter as much as willingness to pay. To explain the prices of stamps, you have to explain the latter. Sometimes, the only explanation for that is irrational exuberance.

Basil

I would think that investment more than lust plays a part in "crazy money" purchases. These are very sophisticated buyers who know what they are doing.

Another datapoint for the discussion: https://goscf.com/t/38095
The 40$ for this Holyoke stamp is really only a 10$ premium over the 'normal' 30$ c/v for this precancel.
Precancels are a great specialty to find stamps on the very low end of the price/scarcity spectrum.

Stamps need to be traded in order for a value to be determined. The values are always changing as stamps are bought sold. The stamps resting in your album have a value only determined when it is sold. That is why stamps can be so hard to value. Some ebay sellers think they have a $500 stamp, when in fact, no buyer will pay that much. Therefore the value will only be determined when it is actually sold.

The market value of anything, including stamps, is precisely where the buyer and seller agree on a price.