The Effect of Scarcity on Anticipated Price Appreciation 
Michael Lynn, Cornell University 
Paulett Bogert, University of Houston 
Researchers in psychology and marketing have found that consumers’ perceptions and 
evaluations of a product’s attractiveness, desirability, expensiveness, quality, and taste are 
affected by knowledge that the product is scarce. This study examines scarcity’s effect on a 
new variable-anticipated price appreciation. Although scarcity does not affect a product’s 
actual potential for price appreciation, news reports of scarce collectibles that have 
appreciated in value may lead people to develop naive economic theories associating scarcity 
with price appreciation. Consistent with this expectation, we found that scarcity increased the 
anticipated price appreciation of two collectible products. The practical implications of this 
result are discussed along with issues for future research. 
 
Marketers often use scarcity appeals in advertising and promotion. Products as varied as art 
prints, automobiles, collector’s plates, coffee mugs, dolls, fashions, guns, lipstick, liquor, shoes, watches, 
and wines are produced in limited quantities and are promoted as rare, scarce, or difficult to obtain. The 
pervasiveness of these scarcity appeals makes scarcity’s effects on consumers’ perceptions and 
evaluations of products an important topic of study. Researchers in psychology and marketing have 
found that scarcity positively affects consumers’ perceptions of product attractiveness (Szybillo, 1975), 
desirability (Fromkin, Williams, & Dipboye, 1973; Lynn, 1989), expensiveness (Atlas & Snyder, 1978; 
Lynn, 1989; Verhallen & Robben, 1994), quality (Atlas & Snyder, 1978), and even taste (Ringold, 1988; 
West, 1975; Worchel, Lee, & Adewole, 1975). As Adam Smith noted over 200 years ago, “the merit of an 
object, which is in any degree either useful or beautiful, is greatly enhanced by its scarcity...” (Smith, 
1776/1937, p. 172). 
This paper examines scarcity’s effect on a new dependent variable-anticipated price 
appreciation. Consumers may believe that scarcity increases a products potential for price appreciation 
because they have heard about scarce product’s whose prices increased, and have consequently 
developed naive economic theories causally linking scarcity to price appreciation (Lynn, 1992b). The 
news media often contain reports about antiques and other collectible goods that have sold for much 
more than their original prices. Invariably, these products are scarce at the time of the reported sale, so 
consumers may learn to associate scarcity with price appreciation. 
It is important to point out that scarcity has no effect on a product’s actual potential for price 
appreciation-any consumer beliefs in such a causal relationship are simply wrong. Scarcity is not a 
necessary condition for price appreciation (although increasing scarcity is), because the prices of many 
originally common products, like Depression glassware, have appreciated over time. Nor is scarcity a 
sufficient condition for price appreciation, because few scarce products ever increase in price. For 
example, it has been estimated that 98% of all artwork never appreciates (Deutschman, 1992). 
Economic theory makes it clear that scarcity is reflected in current, not future prices. Of course, price 
appreciation is a function of increasing scarcity, which is why there are scarce collectibles whose prices 
have increased. Consumers who hear about such collectibles and learn to associate scarcity with price 
appreciation are making an error by failing to distinguish between current scarcity, which affects only 
current prices, and increasing scarcity, which affects price appreciation. 
The possibility that consumers may believe that scarcity increases a product’s potential for price 
appreciation has both theoretical and practical importance. From a theoretical perspective, scarcity’s 
enhancement of anticipated price appreciation may help to explain some scarcity effects on product 
desirability, because expected price increases should appeal to consumers looking for investments. This 
is not to suggest that anticipated price appreciation mediates all scarcity effects on desirability. 
Numerous other processes also underlie this effect (see Lynn, 1992a, for a list). However, anticipated 
price appreciation, if related to scarcity, may be a previously unconsidered mediator of some scarcity 
effects on desirability. 
A possible scarcity effect on anticipated price appreciation has practical importance because a 
product’s potential for price appreciation can be used to sell the product as an investment. For example, 
the ad copy for a recently marketed collector’s plate read, “And like exceptional collector’s plates that 
command hundreds of dollars on the plate market, Solitary Watch appears to have what it takes to go 
up in value once the edition closes.” In this case, the Bradford Exchange attempted to increase sales of 
the plate by leading consumers to anticipate an appreciation of the plate’s market price. Similar 
attempts to sell consumer goods as investments are possible for other collectible products as well. As 
Swatch store owner Raman Handa noted about selling collectible watches, “When they (consumers) 
think they are investing, it makes the sale much easier” (Oliver, 1993, p. 343). Even consumers not 
explicitly looking for an investment may feel more comfortable buying something that is expected to 
appreciate in value, because such expectations reduce the financial risks of buying something people 
may later decide they do not want. 
Scarcity’s effect on anticipated price appreciation was tested in a 2 x 2 between-subjects 
experiment reported below. Subjects read an advertisement for either a U.S. stamp or a U.S. coin. The 
ad contained information about the product’s supply (either 15,000 issued/minted, or 1,500,000 
issued/minted), along with a picture of the product and other product descriptions. After reading the ad, 
subjects rated the product on anticipated change in price, as well as several other dimensions. 
Method 
Subjects and Procedure 
One hundred fifty undergraduate business students participated in this study for extra class 
credit. They were given one of four randomly ordered experimental booklets containing a stimulus 
advertisement and numerous rating scales. Each of these elements is described in greater detail below. 
Stimulus Advertisement and Manipulations 
Subjects were shown an advertisement for a collectible good that contained the experimental 
manipulations. Half the time the advertisement was for a “United States Lunar Landing Commemorative 
Stamp” and half the time it was for “The American Eagle Silver Bullion Coins.” In each product 
replication condition, the ad contained a photocopied picture of the advertised good, along with written 
information about the good. This information did not include the price of the stamp or coin, but it did 
contain the scarcity manipulation, among other facts. Half the time the stamp or coin was described as 
scarce-only 15,000 stamps issued (or coins minted). Half the time the stamp or coin was described as 
plentiful-over 1,500,000 stamps issued (or coin minted). 
Dependent Measures 
The next page of the booklet contained three rating scales. Subjects were asked: “What do you 
think the market price of this stamp (or coin) will be like several years from now?”; “What do you think 
that demand for this stamp (or coin) will be like several years from now?”; and “What do you think the 
supply of this stamp (or coin) will be like several years from now?” Subjects responded to these 
questions on numbered 9-point scales whose endpoints were labeled much less than current 
(price/demand/supply, for the three questions, respectively) and much more than current 
(price/demand/supply). Instructions at the top of this page permitted subjects to look back at the ad 
when completing those rating scales. 
The final page of this booklet contained four rating scales. Subjects were asked: “How much 
would you like to have this stamp (or coin)?”; “How expensive do you think this stamp (or coin) is at this 
time?”; “How large do you think the current demand for this stamp (or coin) is?”; and “How large do you 
think the current supply of this stamp (or coin) is?” 
Subjects responded to these questions on numbered 5-point scales whose endpoints were 
labeled not at all ( _____/expensive/large/large, for the four questions, respectively) and very 
(much/expensive/large/large).Instructions at the top of this page asked subjects to complete the scales 
without looking back at the advertisement or their previous ratings. 
Results 
Manipulation Check 
Subjects were asked to rate the current supply of the stamp/coin in order to check the 
effectiveness of the scarcity manipulation. A 2 x 2 between subjects ANOVA on this measure produced a 
significant effect for the manipulation of scarcity, F(1, 146) = 10.76, p < .002, but not for the 
manipulation of product, F(1, 146) = 2.15, ns, or the interaction of scarcity with product, F(1, 146) = 2.32, 
ns. As intended, subjects thought that the current supply of the stamp/coin was smaller when only 
15,000 were said to be produced than when 1,500,000 were said to be produced (M= 2.53 vs. 3.15). 
Price Appreciation 
The principal dependent measure in this study was a rating of the future price of the 
stamp/coin. This rating was made on a 9-point scale ranging from 1 (much less than current price) to 9 
(much more than current price). The mean rating was 6.17, so, overall, subjects thought that the price of 
the stamp/coin would increase in the future. A 2 x 2 between-subjects ANOVA on this measure 
produced a significant effect for the manipulation of scarcity, F( 1, 146) = 7.9 1, p < .006, but not for the 
manipulation of product, F( 1, 146) = 1.00, ns, or the interaction of scarcity with product, F(1, 146) = 
0.27, ns. Consistent with the research hypothesis, subjects thought that the price of the stamp/coin 
would increase more when only 15,000 were said to be produced than when 1,500,000 were said to be 
produced (M= 6.25 vs. 5.81). 
Additional Measures 
Subjects were also asked to rate the change in demand, the change in supply, the current 
expensiveness, and the current demand for the stamp/coin as well as how much they would like to have 
it. These measures were collected to replicate previously demonstrated scarcity effects and to explore 
other potential effects of scarcity. Each of the variables was subjected to a 2 x 2 between-subjects 
ANOVA. However, none of these analyses produced a significant scarcity main effect: change in demand 
(M = 5.44 vs. 5 . 8 5 ) , F(1, 146) = 2.21, us; change in supply (M= 3.88 vs. 3.49), F(1, 146) = 1.38, ns; 
current expensiveness (M= 2.71 vs. 2.67), F(1, 146) = 0.12, ns; current demand (M= 2.80 vs. 2.73), F(1, 
146) = 0.08, ns; and desire to have (M= 2.81 vs. 2.72), F(1, 146) = 0.16, ns. Nor did these analyses 
produce a significant scarcity by product interaction (all Fs < 2.33, ns). 
Discussion 
This study expands the scarcity literature in psychology and marketing by demonstrating a 
previously unstudied effect of this independent variable. We found that scarcity increased the 
anticipated price appreciation of collectible products. This effect was not mediated by scarcity effects on 
perceptions of change in demand, change in supply, current expensiveness, current demand, or product 
desirability because scarcity did not significantly affect these variables in this study. Although it would be 
difficult to prove for certain, this effect is probably due to a naive economic theory associating scarcity 
with price appreciation. Such a naive economic theory might result from the repeated pairing of scarcity 
with price appreciation in news reports of scarce collectibles that have sold for much more than their 
original prices. These news reports may lead consumers to believe that price appreciation is caused by 
scarcity, although it is actually increased scarcity that is responsible for the price increases in these 
cases. 
This study also contributes to the scarcity literature by suggesting a new explanation for 
scarcity’s enhancement of desirability. People may desire some scarce products more than available 
ones because they believe that the scarce products will increase in price over time. Such price 
appreciation is a desirable attribute in a product because it means that the product could be sold at a 
profit in the future. Even if a buyer never intends to sell the collectible, he or she may take pride in 
possessing an object whose value increases over time. Scarcity’s effect on anticipated price appreciation 
did not translate to increased desirability in this study, but the subjects in this study were not selected 
from among coin and stamp collectors. Presumably, scarcity’s enhancement of price appreciation would 
more strongly affect the desirability of a collectible among those people interested in that category of 
collectibles. 
In addition to expanding the scarcity literature, this study has practical implications for 
marketers’ use of scarcity appeals in advertising and promotion. Specifically, it suggests that scarcity 
claims can be used in marketing communications to heighten consumers’ beliefs that a collectible 
product will appreciate in value over time. The manufacturers of limited-edition collectibles will find this 
effect helpful in marketing their products as investments. Even the manufacturers of more 
commonplace, noncollectible products can benefit from this effect by giving away limited-edition 
premiums with purchases of their products. Many premiums have become hot collector’s items 
themselves, so consumers may value at least some premiums as potential investments. If so, then the 
promotional value of premiums would be enhanced if they were described as scarce and were, as a 
consequence, perceived as having stronger potentials for price appreciation. 
The results of this study clearly demonstrate that scarcity can increase the anticipated price 
appreciation of a product. However, it is not clear how generalizable this effect is across different 
products and populations. Most products depreciate rather than appreciate in value. Since this is widely 
known, it is doubtful that scarcity will produce anticipations of price increases for any and all products. 
Most likely, scarcity’s enhancement of anticipated price appreciation is limited to collectibles and other 
product categories that have some visible history of appreciation. Future research should test this 
hypothesis and identify other product characteristics that moderate scarcity’s enhancement of 
anticipated price appreciation. 
The sample in this study was drawn from undergraduate business students at a large, urban, 
commuter university. The ages and life experiences of these students tend to be more diverse than 
those of typical undergraduates at more traditional schools. Nevertheless, there is some question about 
the generalizability of this study’s results to other populations. In particular, it is not clear how much 
these results depend on the relative ignorance of the subject population about collectibles and 
collecting. Since scarcity does not increase actual potential for price appreciation, it is possible that 
highly knowledgeable collectors would not make the error of believing scarcity to be a cause of price 
appreciation. Consistent with this possibility is the fact that Wooley’s (1982) chapter on collectibles in 
the Encyclopedia of Investments does not mention scarcity in his discussion of special attributes that 
make a collectible a good investment. Here is one knowledgeable collector who apparently knows that 
scarcity does not increase price appreciation. Of course, many collectors are amateurs with little 
expertise, so the results of this study probably do generalize to the majority of collectors, even if they do 
not generalize to the most knowledgeable ones. This is another empirical question that should be 
addressed in future research. 
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