The rise and fall of Beanie Baby prices in the 90’s
https://ftalphaville.ft.com/2019/10/07/1570458807000/Looking-back-at-the-Beanie-Baby-bubble/
Beanie Babies were first sold in the early 90’s. Although they were originally sold with the intention of simply being children’s toys, they exploded in popularity as collectibles in the mid- to late 90’s. The prices of Beanie Babies increased from under $10 to thousands to dollars in the span of a few years, although the actual physical quality of their products did not change.
It’s important to consider different aspects of a good that make individuals, or buyers, place a specific value on that item. In particular, what made Beanie Babies so expensive (at least for a few years) was their branding and limited availability. Beanie Babies were intentionally under-stuffed so as to have a more floppy, “life-like” appearance than a typical stuffed toy. Additionally, the manufacturer of Beanie Babies was careful to produce a restricted quantity of limited edition toy designs that were only available at certain retailers. Although toys themselves were not difficult to produce, the artificial scarcity as well as strong advertising resulted in a sudden increase in popularity of Beanie Babies as collectibles. The value of each buyer in the market for special Beanie Babies increased drastically, leading to auctions that inflated the prices of these rare toys to several thousands of dollars.
However, the prices of Beanie Babies did not remain high forever. Due to a phenomenon called the winner’s curse, those with the largest collections of Beanie Babies actually ended up losing the most money. Many people bought Beanie Babies with the intention of selling them off later at a higher price than they bought them for in order to make a profit. Buyers going into auctions would have to estimate the value that the Beanie Babies would have in the future. In other words, each buyer would have to bid under the value that they thought that each toy would eventually have in order to turn a profit. Those who would win the auctions by bidding the highest likely overestimated the values that Beanie Babies would have. In other words, they were unable to profit in the future because they could not sell their Beanie Babies for a price higher than what they paid at the auction. Unfortunately, the Beanie Babies themselves did not have inherent value. There was no way for these individuals to recover the exorbitant amounts of money they spent on the collectibles because they fell out of fashion, and buyers in the market no longer placed such a high value on them.