Rohin Dhar points me to this post:
At Priceonomics, we’ve learned that our users don’t want to buy used products. Rather, they want to buy inexpensive products, and used items happen to be inexpensive. Let someone else eat the initial depreciation, Priceonomics users will swoop in later and get a good deal. . . .
But if you want to buy a used television, you are in for a world of hurt. As you peruse through the Craigslist listings for used TVs, you may notice something surprising – the prices are kind of high. Do a quick check on Amazon and your suspicions will be confirmed; lots of people try to sell their used television for more than that same TV would cost brand new. . . .
To test our suspicions that something was amiss in the used television market, we compared used TV prices to the prices of buying them new instead. . . . It turns out, people have very inflated expectations for how much they call sell their used TV. Only 3 of the 26 televisions we analyzed were discounted more than 30% versus a new TV. Insanely, for some TV models, the median used price is higher than the new market price. . . . What gives? . . .
People appear to be anchored to the price they originally paid for the television, not the current market price. This leaves them blind to the fact that the price of a new TV is always dropping precipitously. CNN illustrates:
The used television market is broken. Sellers overprice their TVs and aren’t even sure exactly what product they’re selling. It’s likely the size of the used TV market is only a fraction of how large it ought to be.
When I was about 5, while my dad was laid off and he was looking for a job, he had this idea that he could make some money repairing TV’s. For a couple weeks (as I recall it) we had some broken TV’s around the house. One of them was a big color TV. I was so excited! I asked my dad if we would get to keep it and he said that it needed a new picture tube, which he wasn’t going to get.
A few years later, we actually got a color TV. It was exciting for about 5 minutes.
There was a world of difference between Star Trek (TOS) in black-and-white and color (I know, we upgraded after the first season–the third season was so bad I couldn’t watch).
What may be happening is feature creep in new televisions is keeping actual or advertised prices from dropping as fast as illustrated or news isn’t disseminating that quickly. I didn’t realize 32in were available for $200 and a quick google search shows most of them still at $300 and even these are 720p models (though that probably doesn’t matter too much at this size).
Of course, these are the prices that people are trying to sell their TVs for on Craigslist. There’s a bit of survivorship bias here (any reasonably priced TV will be sold and the listings removed quickly, whereas people will continue to list higher priced ones for a long time, slowly decaying the price). At any time the listings are going to overweight the TVs that have been listed repeatedly for a long time, and underweight the ones that get claimed quickly.
I suspect similar results would be seen for home prices in a declining market: You’re Selling the [House] for How Much?!,
The Human Mind Cannot Comprehend How Quickly Prices Fall, and Poorly Labeled would all apply there. Houses have the difficulty that there aren’t consistent models, so there’s a limit to how good the market can be, but I would certainly note that a large and well-developed secondary market, with buyers’ and sellers’ agents, and people with a great deal of incentive to find the right price, hasn’t prevented the same sort of thing from happening.
If you look at MLA listings for homes recently, you’ll see lots of homes that are listed at the right price and sell within a couple of days, and lots of homes that are listed at way too high a price and stay listed for months or even a year or longer, with slow price cuts.
(Doh, MLS listings, of course.)