Thread: Market Forces and Razor Prices

I notice that in the winter months the ebay prices are through the roof when the weather breaks the prices drop it seems to have been a consistant flow I have noticed over the past 2 years or so. With an exception to the razors you guys have mentioned such as 8/8 W&B,s, dubl ducks ect.....

Supply and demand? That's easy.

What I want to buy is high dollar.

What I want to sell is low dollar.

Simple.

Originally Posted by HNSB

To elaborate on my post from earlier:

What "supply and demand" really means:
We can plot supply and demand on a graph. The horizontal axis represents the quantity of a given good and the vertical axis represents the price.

Lets first think of this in terms of production, say Fred is a maker of custom razors. He will be willing to make more razors if they sell for $1000 than he will if they sell for $100. Thus, a typical supply curve has an upward slope. We just need to think of the supply curve in this case as being the entire population of people that have razors to sell, rather than one individual. We can even look at specific supply such as Filarmonica razors. If they sell for $100 only a few people will probably want to sell theirs. If they sell for $1000, lots of people will sell them. We still have an upward slope on the supply side. Note that when demand goes up, the supply curve typically doesn't change. Prices go up and more will be supplied, but that's already reflected on the curve. It takes a market force affecting supply available at all price levels to move the curve.

The demand side typically has a downward slope. Lots of people would be willing to buy Filarmonicas for $50, few people would be willing to buy them for $1000. (we'll get into the effects of psychology in a bit...) We are dealing with a relatively small market; it only takes a few guys going nuts over a particular brand of razor to create a very steep curve. The equilibrium price goes way up, even though only a few people are willing to pay that price. Note that when supply moves, the demand curve typically stays the same. Prices will go up or down, and the quantity bought go up or down, but that is already reflected in the curve. It takes a change in quantity demanded at all price levels to move the curve.

For now, we just need to agree that the supply slopes up and the demand slopes down.

Where those curves cross is called the "equilibrium price" and that is the typical market price for a product. In this case the supply curve and the demand curve for Filarmonica razors happens to cross at a high price. Things that will cause a change in the price are things that cause the supply curve, the demand curve, or both to shift.

As Holli4Pirating mentioned, there are lots of Filarmonica razors waiting to be sold. The sellers are smart enough to keep them scarce in the marketplace. If they listed all of those Filarmonicas at one time it would shift the supply curve to the right (more quantity, same curve) and result in a decreased price for those razors. Anytime more supply is added, the supply curve shifts right. Anytime supply is decreased, the curve shifts left. In economics, the term "scarcity" refers to how much supply is available at a given time; the horizontal position of the supply curve. So you are both right: while Filarmonicas may not be scarce in the world, they are scarce in the marketplace, which keeps that supply curve to the left.

Demand works in a similar fashion. The slope of the curve will stay fairly consistent, but when razors are talked up the entire curve will shift to the right. More demand has been created at all price levels. If a razor is talked down, the entire curve shifts to the left: less demand at all price levels. For instance prior to the hype, I might have only been willing to pay $50 for a razor, JimBob might have been willing to pay $200. When the razor gets talked up I might now be willing to spend $70 on it, and JimBob might now be willing to spend $300... There might be small changes in the slope of the curve, but it will still be an downward curve, and the entire curve will move when a razor gets bragged up.

There are a few notable situations that pertain here:

Veblen goods are luxury items that are perceived to have a higher value because they are expensive. The slope of the demand curve for these items goes up: as they go up in price, the demand gets higher. I don't think there are any razors that have fully achieved this status, but there are a couple that are close.

Bandwagon jumping, in economics, refers to situations where people believe in an item's value because other people believe the same. This causes dramatic shifting of the demand curve.

Granted it's far more complicated than that (the curves won't have perfect slopes, and there are other factors in play), but that's the basics of supply and demand as it pertains to razors.

Same pic as before: Razor is hyped, demand shifts right, price goes from P1 to P2:
(note that if a razor was talked down, the same would work in reverse...)
(You could do the same thing by keeping the demand curve in place and shifting the supply curve... Price will go up or down depending on which way the curve moves.)

That is quite a brilliant analysis and I wish to "jump on your analysis bandwagon"

If I read you correctly, the price of a given razor, and since we have decided to pick on Filli's, I will stick with that, will be determined by:

1. The Supply
2. The Demand
3. What the given buyers are willing to pay

So for instance, lets say there are two Fillis on the bay and there are two buyers. For this exercise, I will assume that both razors are in "like new" condition. The price can be set by:

a - What each is willing to pay
b - What the seller believes is the value of the Filli - either by history, speculation or ignorance

So each razor may or may not get sold to one of the two buyers based on the desire to purchase and the price. One or both of the buyers may walk on the sale based on the asking price. Or one has a better asking price, so both go after that one, ignoring the one whose price is too high. In the bidding process, the lower priced razor may escalate and maybe approaching the price of the 2nd razor that was not bid on. So, somebody looses because they either were not willing to bid higher or ran out of time. So now,because there were two buyers and two razors. The looser still wants one, and he may or may not just go after the second one that was priced high.

In my second scenario, there are two buyers but only 1 Filli available. In this case the price can be set by:

a - What each is willing to pay
b - What the seller believes is the value of the Filli - either by history, speculation or ignorance

So this is where you pointed out that buyer 1 may think that $70 is the right price and Buyer 2 thinks that $300 is the right price. So if the seller has a ""buy now" of $300, buyer 1 walks and buyer 2 buys the razor, possibly generating a perceived value or new asking price for Filli's. If there is not a 'buy now" then Buyer 1 stops bidding at $70 and Buyer 2 gets the razor for $71, even though he would have paid $300. Buyer 2 now logs into SRP and tells everybody about the great "deal" he just got on a Filli on e-bay. But in this case, he got a good deal because the other buyer stopped bidding at $70, not because of the asking price of the razor. In fact, if Buyer 1 was also willing to pay up to $300, the razor would have gone for the inflated amount.

So is where we are sitting, with hype and bandwagon involved, the scenario were both buyers are willing to spend (at least for now) the $300 and so we are seeing a temporary increase in price? And, irrespective of how it happened, doesn't the fact that there were 2 buyers and only 1 razor play into the pricing? It seems to me that it does.

If I were a seller and had a bunch of Fillies in a box I would:
1. Only sell one or two at a time to keep the availability low
2. Watch for the frenzy demand and either place high "buy it now" prices on them or just watch the bandwagoners go crazy and bid insane amounts on them.

This has been my point. I don't care where the razors are. If they are not on the market, they are not on the market. Either in a private collection or waiting for the demand to go up.

I wholeheartedly agree with the posts that say go buy something else - I would. But self control and restraint are often lost when the frenzy starts.

Thanks Alembic. I didn't come up with any of that, just regurgitated it in terms of razors. I forgot to mention in my post above that when we look at those supply and demand curves we are talking about the entire market for x. You could apply it to the straight razor market, the Filarmonica market, or even the market for rusted out Zeepks with broken scales. It's always more of an average of the market though. There is potential for individual transactions that don't fit the curves.
Also remember that what I posted is very simplified from how an economist would look at the market for these things. There is a lot more to analyzing it. (A lot of which I don't understand)

Originally Posted by HNSB

Thanks Alembic. I didn't come up with any of that, just regurgitated it in terms of razors. I forgot to mention in my post above that when we look at those supply and demand curves we are talking about the entire market for x. You could apply it to the straight razor market, the Filarmonica market, or even the market for rusted out Zeepks with broken scales. It's always more of an average of the market though. There is potential for individual transactions that don't fit the curves.
Also remember that what I posted is very simplified from how an economist would look at the market for these things. There is a lot more to analyzing it. (A lot of which I don't understand)

Very cool. Are you and economist or an engineer maybe? I am an EE and looking at data like this is very helpful. It is not like we are going to change the laws of economics with it, and we probably won't change the price of a razor with it. It is just fun to understand what the heck is going on.

PPs, DDs, QQs: nice colors, but I'm totally lost. Then again my lather is generally nothing to write home about either. Although I've learned something through all this, which is maybe I should give up lapping my honing brick on the sidewalk. Yup, helps to have graduated with a major in NS (non sequiturs).

Like mother always said, "the higher it flies, the much."

Great thread.

I think there are many forces at work regarding razor prices.

One is that they were undervalued "old junk" for many years. Few buyers willing to pay for them any more than for any other cheap novelty item. Now that more people are buying them to use they become more valuable. Not to mention the fact that prices for absolutely everything, across the board, have risen.

Another is that I think Ebay seriously distorts prices. Whereas in the old junk store days the seller could only get whatever an average Joe strolling in off the street was willing to pay, now on Ebay everyone in the world sees it and so the final sales price reflects what a single individual is willing to pay. That person may be a collector, or an idiot, or someone who is in an area where such things are scarce. No matter what, that buyer has personal, specific reasons for their top offer and for this reason Ebay shows only the extremes, not the average. The beanie baby phenomenon mentioned earlier is a perfect example.

I'm not entirely convinced that razor prices are, on average, totally nuts. Granted, I've seen razors go on Ebay for multiples of what I'd pay (Filarmonica's and some collectibles), but on average they still go for a fraction of what a new one would cost (although that fraction gets closer to new prices everyday).

A perfect example is a razor I bid on last week. It was a Reynolds wedge in tortiseshell in (apparently) great condition with little hone wear, good box, etc. It languished for a week with no bids at $49. It expired at 2:30 am EST and I bid up to $55 with 10 mins to go, sure I'd get it. With 2 secs left someone sniped it and I'm still kicking myself because it was worth more to me than what I bid. Anyway, the reason I mention this is because a few days later I saw an old page from a razor catalog with exactly that razor in it. I think it was from the 1870's, but am not sure. That razor was priced new at $11.50. Cheap, right?

Not when you consider that back then $10 was a good monthly wage, and $5 was rent. A one oz gold piece was $20. So, by today's standards, that razor would be $350 to $500, depending on how you cut it. So even if I'd paid $100 for it that could be considered a deal relative to what it cost new, antique value, the fact that tortise shell is unobtainable now, old-school craftsmanship, etc.

Most razors I see on Ebay go for $25-$75. This is a small amount of money relative to dinner for two, a tank of gas, a good cigar or bottle of booze, a DVD, a bag of dog food, anything. A relatively good deal I think, and a price I am happy to pay esp considering that they were $2-$15 new, or $50-$350 or so in today's dollars- ie the same as a Dovo, Boker, Thiers Issard, or even Livi is new today.

Ebay prices have driven up junk store prices because every shop owner now looks at Ebay as a guide. I also think that the "crazy prices" may be bringing them out of the woodwork and into the auctions, so I'm not too sure the supply is infinite. It's easy to imagine most of the good ones finding their way into strong hands (such as those on this forum and others) and being held and hoarded, and increasingly rarely being offered for sale (except at estate sales, etc).

I also think that the straight razor "movement" is likely to keep growing for the foreseeable future as more people are reacting against the "Wal-Mart-ization" of our culture and returning to quality. The fact that AOS was bought by Palmolive or whomever and put in malls shows they've done their homework. Ask any vendor- I'll bet their business has gone up more that 30% per year for the last 5 years and likely doubled in the last two. Generational changes, which I think this is, tend to last for years if not decades.

I've seen the same thing happen with muscle cars- oh the beauties I passed on for $1k-$3.5k just 15 years ago that now are worth $25k+++. Even with the crisis prices have held. Same thing with Harley Davidson's. It's not like the housing bubble which was fueled by hype, marketing, and easy credit. Things that are useful, with hands-on enjoyment that don't create future liabilities and that cost pocket change will always have a market I think. Plus, they have intrinsic value which tends to hold its own.

The real distortions I see (except the occasional extreme) are in the prices between the razors themselves. Then, as now, razors with cool names and sexy scales sell for more that plain-Janes that likely shave just as well. And the fact that the brand names that are much more plentiful sell for more than "rarer" and therefore lesser-known names (with the exception of collectors).

Again, the money involved in all this is a relative pittance. Even if someone managed to get their hands on 30 decent razors per month (impossible over the long term) and restored all of them (one per day would be tough) and made $50 per on Ebay, that's $1500 before taxes and expenses. Fine if you're retired and looking to supplement your pension, but too tough otherwise. And impossible to maintain for even one year. Hardly a "bubble".

I dunno if prices are peaking or have yet to peak. But I doubt they'll crash like stocks, housing, or what have you. I think they'll at least hold because there are more buyers every day. No one's going to get rich but my personal hope is for a break-even over the long term and maybe a few "free" shaves. I'm sure that eventually either me or my heirs will get out of them at least what I have in them.

Originally Posted by Alembic

Very cool. Are you and economist or an engineer maybe?

I'm a paramedic. But... I did stay at a Holiday Inn Express once.

Originally Posted by Rubicon

... I saw an old page from a razor catalog with exactly that razor in it. I think it was from the 1870's, but am not sure. That razor was priced new at $11.50. Cheap, right?

Not when you consider that back then $10 was a good monthly wage, and $5 was rent. A one oz gold piece was $20. So, by today's standards, that razor would be $350 to $500, depending on how you cut it. So even if I'd paid $100 for it that could be considered a deal relative to what it cost new, antique value, the fact that tortise shell is unobtainable now, old-school craftsmanship, etc.

Oops. I'm almost sure you mis-read that: It most assuredly was $1.50, not $11.50:
1897 Sears Roebuck & Co. Catalogue - Google Books

If we assume the razor sold for the highest price then charged, it'd be $1.97, which is just under $60 US by today's standards:
Measuring Worth - Measures of worth, inflation rates, saving calculator, relative value, worth of a dollar, worth of a pound, purchasing power, gold prices, GDP, history of wages, average wage

This opens another conversation entirely, which is; why did "the best" of something that sold for the equivalent of $60 new in 1897 sell for only about 60% of what an average "good" razor sells for, new, today.

But if we go there, we're going to have to use phrases like "mass market" vs "niche market", and we'd end up high-jacking this thread. [1]

[1]...but that's never stopped us before...

Originally Posted by HNSB

I'm a paramedic. But... I did stay at a Holiday Inn Express once.

Crap. Next time warn a guy will ya? Do you know how hard it is to clean coffee off a laptop keyboard?