Markets and Reputations vs Shenanigans

Why do factory seals matter? If you look at trading cards on eBay, you’ll find that factory-sealed sets, packs, and boxes command a premium over anything opened. If you have listened to any episode of EconTalk featuring Michael Munger, you will know that “the answer is transaction costs.”

You probably understand why: the factory seal proves that no one has tampered with the cards. That’s especially important for old wax packs that are easy to unseal, sort, and reseal with worse cards. Sets of cards are similar. An unscrupulous seller could open the set, remove the best cards, and replace them with copies in worse condition. Unlike with sealed sets, I’ve had to discount unsealed sets I’ve sold on eBay because buyers can’t be sure I haven’t picked through them—and I can’t be sure the people from whom I bought them didn’t.

The 1989 Fleer baseball set is a good case in point because it contains some especially noteworthy cards. You can get rookie cards for hall-of-famers Ken Griffey, Jr., Craig Biggio, and Randy Johnson. The set also contains one of the hobby’s most notorious error cards, featuring Bill Ripken.

Supposedly, a photographer asked to take Ripken’s picture. He grabbed the nearest bat and posed. In the first production run, everyone learned that an expletive was written on the bat’s knob and was easy to read for anyone and everyone who got a copy of the card. Ripken says he wrote that on the bat to make it clear it was his and not anyone else’s.

After they discovered the error, Fleer halted the production run for the Ripken card and issued a few corrections: one with the profanity scribbled out, another with it whited out, and another with a black box over it. Even the corrected cards are worth a few dollars, even though Bill Ripken’s career was nothing like that of his older brother, Hall of Fame shortstop Cal Ripken.

As befits any good story involving notable failure, a conspiracy theory emerges. How likely is it, the conspiracy theorists ask, that such an obvious error got past all of Fleer’s quality control personnel without being noticed? As the 1990 Donruss set was a veritable comedy of errors that included the famous Juan Gonzalez reverse negative  card and the Nolan Ryan cards with the switched backs, I’m not surprised the Ripken card made it through. To the conspiracy theorists, though, they either planned the card deliberately or let it pass through as a publicity stunt. If it was a stunt, it worked: here we are 37 years later, still talking about it, and unopened boxes of 1989 Fleer cards are still valued  more than their counterparts from Topps, Donruss, Score, and Bowman.

All of this, of course, happens without government oversight. You don’t need to submit cards to a government authenticator or be part of the dealer’s guild to truck and barter in baseball cards and other collectibles. The price difference between sealed and unsealed sets shows that healthy mechanisms exist to curtail shenanigans. If it works so well for trivialities like baseball cards, why wouldn’t it work well for really important things?