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Rare Book Optimal Pricing

by jim on November 9, 2021

How can rare book sellers determine the optimal price for their items brought to market? If the price is set too high, the buyers may not bid to buy, if the price is set too low, the stock may be sold below optimal pricing. The information that is needed to set the right price for any rare book is typically distributed among the many sellers and buyers who, for the most part, maintain such information private. Only the seller dealers know how much profit they are willing to sacrifice by offering a discount to potential buyers. Only prospective buyers know how much they are willing to pay for items they are collecting. It is thus quite obvious that market prices are not, by themselves, sufficient to guide sellers on optimal pricing.

Marketplaces in which prices alone can guide efficient trade of rare books are highly theoretical. Adam Smith first described the concept of the invisible hand, which guides markets and renders external interference unnecessary, in his 1776 classic, The Wealth of Nations. But how buyers or sellers come to agree on a price that is mutually satisfactory is far more complicated than Adam Smith’s famous concept. Buyers want to pay as little as possible, while sellers seek to sell books at the highest possible price. In economics theory, competitive equilibrium is attained when the price, for the quantity available for sale is equal to the price for the quantity demanded. Note that the competitive equilibrium price is not necessarily the same as the optimal price, at which the total profit of the seller is maximized.

Rare books are heterogeneous, for the most part. Each book has unique attributes which vary from one to the next, such as; condition, imprint, provenance, autographs, marginalia, etc. As a result, sellers have the flexibility to inflate pricing for items that are perceived to be collectible. While this practice discourages bargain hunters, it can lead to overestimating the market’s inelasticity of demand. Despite the uniqueness inherent in rare books, there also exists a certain level of substitution. Two books are near-substitutes if an increase in the price of one book increases the demand for the other. All rare books can generally be considered to have near substitutes, with some variation in genre, authorship, imprint, physical properties, etc. The extent to which a price change in one, affects the demand for another, is dependent on how close they come to being perfect substitutes.

The figure below depicts a hypothetical world, in which 3 competitive equilibriums for two sets of near-substitutes A and B are attainable. The area below the curve for Rare Books A is occupied by the excess demand for its near-substitute – Rare Books B, while the area above the curve is occupied by the excess supply for its near-substitute. As prices for the limited quantities of A & B rise, the curves converge, first at area 1, which is the lowest market-clearing price, where there will be zero excess demand and where prices stop increasing, at least temporarily.  If prices start high with scarcer quantities, prices converge monotonically down to the highest market-clearing, at area 3. At these points, where the curves cross, a pair of prices and quantities with neither excess supply nor excess demand for either A or B, is where competitive price equilibrium is reached.

 

 

Even though the mathematical proof to the theory is well-formulated, the practical problem to finding optimal prices can still be daunting. With near substitutes, the best way to find optimal prices aside from trial and error, is through an auction of some kind: on-line, live, reverse, bid-ask negotiations, etc. With auctions in mind, the substitute aspect generates prices that are good guides to pricing decision making. In theory, the equilibrium price attained at the highest market-clearing area, is the optimal price for sellers to price their similar items. It implies that auctions which start the bidding process at the highest price or encourage bidding at the high end, such as Decreasing-Price Auction (Dutch auction), Sealed Tender or Vickrey type auctions (Second highest bid), should offer the best means to reach optimal prices.

In conclusion, seller optimal pricing for rare books with scarce quantities and high demand, should be priced at the highest market-clearing price equilibrium. At such price level, demand will match supply at the highest price possible. The best way to determine such a price is to examine sale prices of near substitutes that were sold at Dutch, Sealed Tender or Vickrey auctions. While Dutch or Sealed Tender type auctions are rarely held by auction houses offering rare books for sale, Ebay’s proxy bidding system, where the winner pays the amount equal to the Second-highest bid plus the increment, is quite popular.

References:
Milgrom, Paul. 2017. Discovering Prices. Auction Design in Markets with Complex Constraints. New York: Columbia University Press.
Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations. London: Methuen and Co, Ltd.
Vickrey, William. 1961. “Counterspeculation, Auctions, and Competitive Sealed Tenders.” Journal of Finance 16(I):8-37.

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Ophthalmodouleia

Ophthalmodouleia

Sadly, the pandemic is still with us, but so are the Virtual Book Fairs (VBF)! The Antiquarian Booksellers’ Association of America (ABAA), had planned to hold an impromptu, in-person event of its highly successful New York fair this month, but  switched to a VBF instead, complements of the Delta variant.

At this time we are also hearing much in the economic news about the return of inflation. Exaggerated or not, inflationary pressures are making their presence felt across a number of goods and services. It is therefore only logical to expect that pricing for the scarcest of commodities would also rise. The prices of rare books too are climbing, and bargain hunters are having a hard time finding that undervalued sleeper in their favorite supply channels. Just this month, our Rare Book Sale Monitor captured the activity at the recent ABAA New York event. Below are some general statistics exhibiting a comparison of the activity at the New York virtual show, and the recent corresponding ABAA events for Boston held at the end of last year, and California which was held in February 2021.

 

ABAA Virtual Book Fairs performance

 

This month’s New York fair produced less dealer participation and fewer items offered for sale than prior events. One possible explanation for this is the negative experience some dealers may have experienced in the past. Our analysis of VBFs  show  that the majority of dealers did not make enough sales during the shows to breakeven, since only the top 15% of the sellers accounted for more than 60% of total revenue. Despite dealer costs being significantly lower compared to the expenses associated with brick-and-mortar shows, which include commuting, hotel accommodations, window display rentals and so forth, it seems that several dealers opted not to participate at the New York fair at all. As a result, New York had the lowest number of items offered for sale compared to prior fairs. Despite having fewer items, the fair actually had the highest total dollar amount for sale than previous events; with average prices almost double that of previous events.

The price increase was evenly distributed across all price levels. At the high end, Daniel Crouch Rare Books Ltd., posted “Dell’arcano del mare, di D. Ruberto Dudleo duca di Nortumbria, e conte di VVarvich, libri sei… ,” the first atlas on Mercator’s Projection from the library of Imperial geographer Wolfgang Engelbert Earl of Auersperg, by Dudley Robert, offered for a mere $1,572,000. Now listed on Daniel Crouch Rare Books website for $1,200,000. In California the high end was at $1,350,000 with the Sophia Rare Books posting of “Summa de arithmeticageometriaproportioni et proportionalita,” a book on mathematics, written by Luca Pacioli and first published in 1494. In Boston, the highest priced item was offered by Biblioctopus in a collection of Alexandre Dumas books for $525,000.

The results at the New York fair are a reflection of the “less for more”, selling in total less items at a higher average price. Boston scored the most expensive sale with Rare Books Le Feu Follet selling “The Complete Archives of Louis Chevalier de Sade” by Louis Chevalier de Sade for $120,000. In California, Herman H. J. Lynge & Son sold the “Pilot Chart of the North Atlantic and North Pacific Ocean,” a large collection of 185 pilot charts relating to the North Atlantic and North Pacific, by Bartlett John; J. E. Craig; Henry F. Picking et al. for $115,000. And lastly, at New York, Sokol Books Ltd., sold “Ophthalmodouleia,” the first Renaissance work on ophthalmic disorders and eye surgery, by Bartisch Georg for $98,250.

As of this post, the upcoming 45th Boston International Antiquarian Book Fair is scheduled to take place as a VBF. It will mark a complete year from the launch of such events and another valuable insight into the state of the rare book trade. If what we have seen so far is an indication of things to come, we should have another successful event, with the number of books offered for sale remaining relatively low while average prices continue their ascend. Dealers interested at selling at the high end of the spectrum should offer works around $100,000 while those looking to score multiple sales should offer multiple items at approximately $400. Buyers should avoid impulse buying and should try to negotiate pricing down.

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The Good, the Bad and the Rare

August 22, 2021
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Alabama native Asa Carter was a home-grown American fascist and anti-Semite, founder of the Ku Klux Klan of the Confederacy, right-wing radio announcer, publisher of the segregationist newsletter “Southerner”, and secret author of the famous 1963 speech by Gov. George Wallace of Alabama: ‘Segregation now…segregation tomorrow…segregation forever.’ Forrest Carter’s first book The Rebel Outlaw: Josey […]

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The Rare Books of Popular Chemistry

July 19, 2021
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In a popular science book, the English Chemist James Lovelock described his Gaia hypothesis to a lay readership. The hypothesis proposed that living organisms and inorganic material on Earth are part of a dynamic, integrated, self-regulating system that shapes the Earth’s biosphere, and maintains ideal conditions for life to flourish. Initially received with skepticism, the […]

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Copyright Page or “Confusion Page of Anomalies”

May 31, 2021
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The publishing details for a book are usually printed on the back of the half title or, in some cases, the title page. This page is sometimes called the ‘copyright page‘ or the ‘publishing details page’. Through the years, publishers have used a number of copyright designations to specify the edition or the printing of […]

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Rare Book Sale Monitor update – 1st Quarter, 2021

April 19, 2021
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As the pandemic spread and live book fair events shut down around the world, Virtual Book Fairs (VBF) offered a new way to buy and sell books online. At last count, there have been at least a couple dozen virtual fairs organized by IOBA, PBFA, Getman, ABAA, ABA (“Firsts”), SLAM and others. Judging from the […]

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The Most Complicated Machine

April 5, 2021
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A universal notation with symbols employed that are few and simple enough, furnish the most important assistance in the design of the order and succession of the movements in a machine’s engine. This was the most important tool that Mr. Charles Babbage employed in his attempts to construct his celebrated calculating machines. In his own […]

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The Importance of Translation Exemplified by the Four Great Classical Novels of Chinese Literature

February 24, 2021
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The books that sinologists commonly refer to as the Four Great Classics of Chinese literature are: Dream of the Red Chamber, Romance of the Three Kingdoms, The Water Margin and Journey to the West. Their chronology spans from the Chinese Ming dynasty to the Qing Dynasty. The Water Margin and Romance of the Three Kingdoms […]

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Rare Book Sale Monitor update – 2020

January 21, 2021
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While much of the world has come to a stop at times during the pandemic, the rare book trade, confronted with challenges of its own, managed to finish the year without a major loss. It was, however, especially painful for rare book sellers – at least physically – who normally depend on in-store, in-person book […]

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Rare Book Sale Monitor update – Virtual in Boston

December 10, 2020
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Recently, book collectors, book dealers, auctioneers and book trade organizers, connected in three virtual spaces for the annual Rare Book Week, which usually take place in the month of November, in Boston. The new virtual platform settings had the obvious benefits of enhanced reach, scalability and cost-effectiveness, for the organizers, and the potential of boosting […]

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