The hot toy for Christmas this year are Hatchimals. Apparently a lot of people want them. When more buyers enter a market, we represent that by an increase in demand (a shift tot he right in the demand curve. If, when demand increases, the price of the product doesn't increase, we would expect there to be a shortage of the product; more people want the product than are available. As a result, we would expect upward pressure on the price to alleviate the shortage.
In the case of popular Christmas toys however, the manufacturer is usually reluctant to raise the price of their product once it is on the market. This reluctance exists for a couple of reasons, 1) if the company realized they underpriced their product and suddenly increased the price in light of unanticipated demand, the company would be labeled a bunch of greedy bastards and the demand would likely decrease, and 2) the perpetual shortage created by the low price leads to a ton of publicity and that publicity is good for the company in the long run.
SO when we get a hot Christmas toy (Hatchimals, Furby, Tickle-me-Elmo, Cabbage Patch Kids...), it's unlikely we will see an increase in the price of the product on the store shelves. The price is the price and it usually doesn't move. So what do we get? Lines, fights, and a lot of news coverage.
Does that mean that the market doesn't work? Afterall, we preach that if a market is working correctly, there will be no perpetual shortages or surpluses and prices will adjust to ration the good unless the price is regulated so it can't adjust. So why don't prices for the 'hot toy' each Christmas?
Well, they do. You just have to look at ALL of the markets:
The bestselling author of 'Water for Elephants' has managed to sell out of the 156 Hatchimals that she bought off eBay in just four days.
Sara Gruen managed to make a profit of approximately $6,000 after she sold the lot to individual buyers, which she purchased for the price of $23,595.31 the day after Black Friday.
Last week, she began to complain online that eBay would only let her sell four od [sic] the toys a week, which meant she would not be able to get rid of the Hatchimals before Christmas, but then she set up an online shop and they went quickly, with each toy also coming with one of her signed books.
You see, eBay is a market. And prices on eBay are rising to alleviate the shortage (right now, prices for a new Hatchimal are in the $130 range on eBay).
Greedy Bastards.
