Price Determinants of Collectable U.S. Commemorative Stamps: An Examination of Philatelic Demand

Abstract

Philately, the collecting of postage stamps, is a popular hobby throughout the world. Stamp collectors’ motivations vary from the simple pursuit of leisure and recreation to financial investment and speculation. This study explores the demand for vintage U.S. commemorative stamps by examining the determinates of retail prices across alternative categories of sellers. Using regression analysis and a cross-sectional sample of the first 250 commemorative stamps issued by U.S. postal authorities, we estimate price equations for representative national dealers, regional dealers, and for electronic auction sites. The results indicate that production quantities, age, and specific attributes of individual stamp issues are the primary determinants of retail price. However, the pricing structures across categories of sellers are significantly different in a hierarchical manner indicating that dealers may successfully segment the collectable stamp market across different types of collectors but alternative explanations for our conclusions cannot be excluded without additional research.

Keywords

D12 D40 L15 Z11 price determination collectables stamps philately market segmentation

Introduction

It is estimated that 60 million people world-wide collect postage stamps (Apfelbaum, 2022), a pursuit known as philately. Although it is estimated that a third of these collectors reside in China, the United States is home to more than 5 million philatelists (Chubb, 2022). People have collected postage stamps since the first issues were introduced during the mid-nineteenth century by the governments of the major industrial economies as a means to prepay delivery fees on letters and packages. Then, as now, the personal motivation for collecting stamps runs the gamut from a recreational leisure activity to a serious exercise in financial investment and speculation. In the U.S., philately is a well-organized hobby that supports a myriad of national organizations¹ and local clubs as well as a multitude of periodicals and publications. Regular stamp shows, exhibitions, and competitions are held throughout the calendar year on the national, regional, and local levels. The popularity and role of stamp collecting within the American cultural landscape is prominently highlighted by the Smithsonian National Postal Museum in the nation’s capital (Smithsonian National Postal Museum, 2022b).

An extensive commercial infrastructure exists to support the American philatelist’s appetite for stamps and the wide assortment of supplies and services used to catalogue, store, display, study, and manage stamp collections.² During the hobby’s peak boom years of the 1970s, more than one thousand stamp dealers operated in the U.S., with only about half that number in business today (Apfelbaum, 2022).³ Stamp dealers are also well organized through professional groups such as the American Stamp Dealers Association (ASDA, 2022) and range in size from small “mom and pop” operations to large corporations with national customer bases. A cursory review of the promotional materials and advertisements placed in the hobby’s leading news periodicals suggests to the casual reader that the collectable stamp market is highly competitive. However, a closer examination of the posted prices and the results of online stamp auctions reveals a wide disparity in prices across stamp dealers for identical stamp issues that are comparable in quality and overall condition.

In this paper, we build and estimate a regression model to empirically examine the determinates of retail price for collectable vintage U.S. stamps across different categories of sellers—regional dealers, national dealers, and online auction sellers. We also apply our model to the benchmark prices published by the predominate catalogue of U.S. stamps, Scott Specialized Catalogue of United States Stamps & Covers (2021).⁴ Our results indicate that production quantities, age, and specific attributes of individual stamp issues are the primary determinants of catalogue and retail price for all categories of sellers. However, the pricing structures across the alternative categories of sellers are significantly different in a hierarchical manner indicating that dealers have successfully segmented the collectable stamp market across different types of collectors. Collectors aware of these market conditions may be able to minimize the monetary cost of their hobby and help maximize the future financial value of their collections.

In the next section, we present a brief overview of the academic literature on stamp collecting which is followed by descriptions of our cross-sectional sample and empirical model. The results of our analysis are then presented and discussed. The paper concludes with a discussion of the implications of our findings and suggestions for further research on this topic.

The Academic Literature

The desire to collect objects with perceived intrinsic value appears to be a common human trait observed across diverse cultures and over time. The object of a collector’s desire varies widely—works of art, antique furniture, autographs, books, coins, sports cars, vintage toys, trading cards, watches, and postage stamps, just to name a few.⁵ The full extent of collecting behavior is not well-documented. In their review of the economic returns to collectibles, Burton and Jacobsen (1999) report that the limited survey data on collecting behavior suggests that between one-third and two-thirds of American households include collectors. The reasons identified by social scientists for why people collect can be divided into two broad categories—for the psychological and sociological rewards (Belk, 1995; Van der Grijp, 2002; McIntosh & Schmeichel, 2004)), and for the monetary financial rewards (Grable & Watkins, 2016). From the psychological perspective, collectors are seen to earn personal utility from assembling collections of objects that convey meaning to them or provide outlets for artistic expression and aesthetic pleasure. Furthermore, groups of like-minded collectors often form clubs and organizations that provide a sense of community and social belonging. Although economists recognize these nonpecuniary benefits, unsurprisingly the economic literature on collecting behavior primarily focuses on the financial returns to collecting. (See Burton and Jacobsen (1999) for a comprehensive review of this extensive literature through the end of the twentieth century.) This is also true concerning the economic literature specifically examining stamp collecting.

The primary financial benefit of collecting stamps is accrued through the appreciation in monetary value of a collection over time. The difference between prices paid upon acquisition and prices realized upon disposal reflect the economic return of the philatelist’s investment and can be compared to the returns of other assets. Several studies examine the relative efficiency of holding collectable stamps as an investment. Using realized price data from 84 auctions between 1963 and 1977 for a small subset of early U.S. stamps, Taylor (1983) estimated a quality-adjusted mean rate of return of 12.2%. This compares favorably to his estimate of an 8.7% return on common stocks for the same period. Cardell, King & Petry (1995) constructed a longer time-series of auction data spanning the years 1947 to 1988 for a broader group of stamps and find a nominal annual return of 7.6%. Their results indicate that the return to stamps were inversely related to systematic factors affecting the return to investments in stocks and bonds, thereby leading to their conclusion that stamps may serve as a hedge for more traditional investments.

Dimson and Spaenjers (2011) examined the financial returns to stamp collecting using contemporaneous catalogue prices for the fifty most expensive British stamps over the extended 1900–2008 timespan. Their results revealed a 7.0% annualized nominal return that when corrected for inflation resulted in a 2.9% real return on investment. These estimates exceeded the returns on British bonds but were below those on British equities. Dimson and Spaenjers also note that the stamp market exhibited volatility over some periods that rivaled that of stock markets and that overall prices peaked in the late 1970s and early 1980s. Reporting that the systematic risk of holding stamps was relatively low, they also conclude that holding stamps may serve as a hedge against unanticipated inflation.

Veld and Veld-Merkoulova (2007), examined a price index of highly collectible British stamps for the 2002–2006 timeframe and found that the nominal returns on stamps were lower and less volatile than those of various stock indices. However, the stamp index achieved returns exceeding those predicted by their estimation of a standard Capital Asset Pricing Model. Thus, Veld & Veld-Merkoulova conclude that collectible British stamps offer diversification opportunities for investors. Alternatively, Grable and Watkins (2016) report that the return on classic U.S. stamps, as measured by catalogue prices, was 5.5% over the 1969–2013 timeframe but only 0.6% for the 2000–2013 period. When compared to standard U.S. stock and bond indices for these periods, Grable & Watkins conclude that stamp collectors kept pace with inflation but bear an opportunity cost for holding their collections. Over the 1969–2013 period, they estimate investors in U.S. classic stamps underperformed stock investors by 3.8% and bond investors by 3.4% on a risk-adjusted annualized basis.

It is not surprising that researchers have reported mixed results for the financial return to stamp collecting as the market for stamps is composed of collectors with varying and overlapping motivations for buying and selling stamps (Gelber, 1992). One consistency within the literature is a relatively high degree of reported volatility in stamp prices over time. As in other collectibles markets, stamps may be subject to periods of boom and bust as the tastes and preferences of collectors change over time. Furthermore, it has been noted that excessive financial speculation can lead to “bubbles” in the stamp marketplace.⁶ Franses and Knecht (2016) examined the late 1970s bubble in Dutch stamps and Huang (2001) and Chen and Chen (2012) discuss the market effects of speculation in recent issues of Chinese stamps. Even though speculative bubbles may also arise in markets for traditional investment assets, many in the commercial philatelic industry downplay the potential investment features of collecting and promote the hobby for its educational aspects and for personal enjoyment (CNBC, 2010).

McIntosh and Schmeichel (2004) propose that collectors can be categorized into four broad overlapping groups: “Hobbyists” who collect based on their personal pleasure experienced from collecting; “Passionate Collectors” who have strong personal desires to own the items they collect and are willing to pay to satisfy these desires; “Inquisitive Collectors” who collect for investment and financial gain; and “Expressive Collectors” who use their collecting behavior as a form of self-expression. As representatives from each of these groups are involved in American philately, stamp prices in a competitive marketplace should reflect the sum of the overall demand across each category of collector and converge to a competitive price across sellers. However, our observations of retail prices across different types of U.S. stamp sellers reveals significant variations in pricing structures. This suggests that the collectible stamp market may be segmented by sellers according to collectors’ motivations and their associated levels of knowledge about how to value the stamps they collect. We explore this idea in the sections that follow.

The Data

The U.S. retail stamp market is characterized by heterogeneity in firm size and scope of operations. Sellers of collectible stamps range from small one-person private firms to small and medium sized businesses to large corporations and auction houses. Smaller dealers generally specialize in a specific category of stamps—for example, stamps from a particular nation or region of the world. These sellers primarily conduct business through advertisements in philatelic periodicals and a limited web presence. In addition, small and medium sized dealers often make sales in-person during stamp bourses held at regional and national stamp exhibitions. Larger firms will regularly publish catalogs of their inventory which are distributed to collectors via the web and in physical hard copy. Large dealers normally carry broader more extensive inventories of stamps and also sell supplies such as albums and catalogues. Except for the very largest corporations with extensive and sophisticated websites and national followings, most U.S. stamp dealers tend to have a regional footprint with many located on the east coast. Since the turn of this century, stamp dealers of all sizes have augmented their traditional sales approach through online auction sites such as eBay. In addition, several specialized philatelic online auctions sites now serve the market. These online marketplaces also allow collectors to buy and sell between themselves, bypassing professional dealers. Since the earliest days of philately, the rarest and most expensive stamps are normally auctioned by the same prestigious auctions houses that are known for selling fine works of art and historic artifacts.

To examine the retail pricing structure of the American collectible stamp market, we built a database consisting of information on the first 250 commemorative stamps issued by the U.S. postal authorities. Commemorative stamps are those issued to honor a special event of historical or cultural significance. These stamps were chosen due to the availability of reliable information concerning the quantity of the issues originally produced and sold.⁷ Such data are not available for early definitive stamps issued for regular everyday use.⁸ Early U.S. commemorative stamps are highly collectable as they generally depict original engraved artwork about their subject and were often produced in a larger physical size than general issues. Our sample consists of those commemorative stamps issued between 1893 and 1939. This includes all major numbered stamps categorized as commemoratives by Scott’s Catalogue within the range of Scott #230 (1¢ Columbus in Sight of Land) through Scott #878 (10¢ Jane Adams). Most of the stamps in the sample have face values of one cent, two cents, or three cents—representing the cost of mailing a first-class post card or first-class letter during the time frame.⁹ However, on occasion, sets of commemorative stamps were issued containing various higher denominations ranging from four cents up to five dollars.

In addition to quantities, the data include the year of issue, the 2022 Scott catalogue price for never hinged,¹⁰ mint, and used examples, as well as special characteristics of the issue as described in the next section. Retail prices were compiled from the 2022 price lists of representative national and regional dealers along with realized contemporaneous prices from online stamp auction sites.¹¹ As quality is an important determinate for pricing any collectible, we selected representative dealers and auction results using quality grades that closely mirrored those employed by Scott: “The Scott Catalogue value is a retail value: that is, an amount you could expect to pay for a stamp in the grade of Very Fine with no faults.” (Scott, 2021, p. 11A). Scott publishes illustrations of its standards for color, centering, margins, perforations, gum, and other attributes that determine various grades of stamps ranging from Very Good to Superb to Very Fine is the median of this range.

If someone had purchased one copy of each stamp in our sample from their local Post Office at the time of issue, the total expenditure would have equaled $31.35 in nominal dollars. Table 1 reveals the valuation of this basket of stamps according to the 2022 edition of the Scott Catalogue, as well as the cost if our basket of stamps was purchased from a representative regional dealer, national dealer, or through an online philatelic auction site. The catalogue values and basket prices are shown for never hinged, mint, and used stamps where possible.¹² Note that if the hypothetical collector who purchased our sample basket of stamps at their local Post Office and had kept the stamps in fresh never hinged condition would own a collection today with a Scott Catalogue value of $51,404.45 in 2022 dollars. The catalogue value falls dramatically to $16,461.25 if the hypothetical collector kept the stamps in mint condition but had hinged them into an album as was the custom during this period. Table 1 also reports the descriptive price statistics for the sample across catalogue values and the relative types of sellers. Large variations are clearly seen in the mean prices across sellers. For the category of never hinged stamps, the mean auction price is less than half of catalog value ($94.14 vs. $205.61). However, the mean national dealer price for mint stamps exceeds catalogue value by 70.8% ($112.50 vs. $65.85) while the regional dealer mean mint price is 9.7% less than catalogue value ($60.32 vs. $65.85). The high cost of buying from a national dealer is also seen for used stamps. For our sample, the mean used price for a national dealer exceeds the Scott Catalogue’s listed used value by 43.3% ($47.15 vs. $32.90).

Table 1.

Price by Seller Category: Descriptive Statistics (N = 250).

Statistic	(1) Catalogue Never Hinged	(2) Catalogue Mint	(3) Catalogue Used	(4) Regional Dealer Mint	(5) National Dealer Mint	(6) National Dealer Used	(7) Auction Never Hinged
Basket price	$51,403.45	$16,461.25	$8,225.55	$15,079.15	$28,125.65	$11,786.30	$23,534.61
Mean price	$205.61	$65.85	$32.90	$60.32	$112.50	$47.15	$94.14
Std. Dev.	$979.74	$286.03	$144.82	$260.53	$462.14	$205.54	$408.01
Minimum	$0.25	$0.25	$0.25	$0.25	$0.30	$0.20	$0.05
Maximum	$9,750.00	$2,400.00	$1,200.00	$2,250.00	$3,750.00	$1,800.00	$3,595.00

Note: All figures expressed in current 2022 U.S. dollars.

Pricing strategies between seller categories clearly vary. We calculated the percentage of stamps within our sample that were priced above listed catalogue value across dealer categories and stamp condition. The results are shown in Table 2. Every stamp in our sample sells in mint condition at the representative national dealer for more than catalogue value while only 27.20% of those same stamps are sold at a premium above catalogue at the regional dealer. For mint never hinged stamps bought at online auction sites, only 16.80% of the stamps in our sample realized a price above catalogue value. When seller prices are expressed as a percentage of catalogue value, Table 2 shows that the national dealer’s mean retail markup for mint stamps more than doubles the stated catalogue value. Similarly, the national dealer markup on used stamps results in mean retail prices more than one hundred and fifty percent of catalogue value. Collectors buying mint never hinged stamps in our sample through online philatelic auction sites paid about 86% of stated catalogue value. However, auction buyers naturally face greater uncertainty and variance in final price as reflected in the standard deviation.

Table 2.

Percentage of Sample Prices above Catalogue Value by Seller Category and Stamp Condition.

Seller Category/Stamp Condition	Percentage of Sample with Retail Price Above Catalogue Value, %	Retail Price as a Percentage of Catalog Value, Mean for Sample
Regional dealer/Mint	27.20	101.63% (36.45)
National dealer/Mint	100.00	211.86% (54.06)
National dealer/Used	71.60	156.61% (69.91)
Auction sales/Never hinged	16.80	86.34% (122.27)

( ) – Standard deviation.

We conducted paired sample t-tests to determine if the observed differences in mean prices between seller categories are statistically significant. The results are shown in Table 3. As seen in the table, the pricing structures by stamp condition across seller categories are highly correlated for all available comparisons. Also, note that for each comparison our tests revealed a statistically significant t-statistic. The results indicate that the mean auction price for never hinged stamps is significantly less than the mean catalog value. Likewise, the regional dealer mean price for mint stamps is statistically less than the mean catalog value and the mean national dealer price. For both mint and used stamps, the national dealer mean price is greater than the mean catalogue price. These results indicate that the market for collectible U.S. commemorative stamps has not converged competitively and that retail prices vary significantly across categories of sellers. We build and estimate a regression model in the next section to more closely examine the determinants of observed retail prices.

Table 3.

Difference in Mean Prices: Paired Samples t-tests (N = 250).

Comparison Pairs	Correlation	Difference	t-Statistic
Never hinged
Auction - Catalogue	0.857	-$111.48	−2.654^***
Mint
Regional dealer - Catalogue	0.999	-$5.53	−3.192^***
National dealer - Catalogue	0.990	$46.66	4.016^***
Regional dealer - National dealer	0.987	-$52.18	−3.947^***
Used
National dealer - Catalogue	0.995	$14.24	3.578^***

Note: Price differences expressed in current 2022 U.S. dollars.

Empirical Model and Results

Our empirical model is inspired by the work of Schnitzel (1979) who estimated a price equation to determine the effect of quantity issued and age on the catalogue value of U.S. commemorative stamps. Using 1976 Scott Catalogue data for the first 200 U.S. commemoratives and a single stage least squares regression technique, Schnitzel, as expected, found a statistically significant relationship between quantity issued and catalogue value, and a statistically significant positive relationship between age and catalogue value. The effect of age was found to be relatively stronger than that of quantity issued in each of Schitzel’s specifications. However, Schnitzel’s simple model failed to control for other easily observed stamp issue characteristics that influence collector demand for early U.S. commemoratives. Thus, along with our Quantity and Age variables, we include three additional independent categorical variables to our model specification: High Denomination, Souvenir Sheet, and Farley Issue. Our single equation expanded regression model takes the following form

l n P r i c e = α + β_{1} l n Q u a n t i t y + β_{2} l n A g e + β_{3} H i g h D e n o m i n a t i o n + β_{4} S o u v e n i r S h e e t + β_{5} F a r l e y I s s u e + ε

(1)

Following Schnitzel’s approach, Price, Quantity, and Age enter the regression in natural logarithmic form to allow for the interpretation of the regression coefficients as elasticities. The specification and descriptive statistics for each of our categorical variables are provided in Table 4.

Table 4.

Specification and Descriptive Statistics of Independent Variables (N = 250).

Variable	Specification	Mean
Quantity	Estimated number of commemorative stamps sold by postal authorities as reported by Scott’s Specialized Catalogue of United States Stamps & Covers	94,259,399 (333,655,834)
Age	Number of years since stamp was first issued by postal authorities; (2022 - Year of Issue)	95.690 (14.060)
High denomination	Stamp’s face value exceeds first class letter rate on date of issue = 1; otherwise = 0	0.372 (0.484)
Souvenir sheet	Special souvenir pane of stamps issued to commemorate special event = 1; otherwise = 0	0.044 (0.206)
Farley Issue	Imperforate stamp issued in response to special printing scandal of 1935 = 1; otherwise = 0	0.100 (0.301)

( ) – Standard deviation.

Due to the expense, fewer collectors originally purchased higher denomination commemoratives at the time of issue, particularly those with face values of one to five dollars. Furthermore, relative to lower denomination issues intended for use on post cards and letters, far fewer higher denomination issues were used in the mails. As a result, High Denomination issues are often highly prized today and command premium prices on the market.

During our sample period, U.S. postal authorities issued several Souvenir Sheets of stamps intended for collectors. These miniature panes of stamps were often associated with national and international philatelic shows and exhibitions. Some include multiple copies of the same stamp and others include examples of several different stamps. Original sales of these souvenirs were often limited to the event at which they were issued. Likewise, the Farley Issues were specially produced commemorative stamps targeted for collectors but are the end result of a national political scandal. They are named after James Farley who served as Postmaster General during Franklin Roosevelt’s presidential administration. In 1935, it became known that Farley provided Roosevelt, an avid stamp collector, and others in the administration with special ungummed and imperforate sheets of several previous commemorative stamp issues. The significant public outcry led to additional printings that were then made available to the general public. Today, collectors often refer to these special issues as “Farley’s Follies” (Smithsonian National Postal Museum, 2022a) and are collected in numerous formats. Unlike the Souvenir Sheets sold at specific events, the Farley Issues were widely distributed and purchased by a broad base of stamp collectors.

Our regression model was estimated using 2022 Scott Catalogue value as the dependent variable across the three categories of stamp condition: never hinged, mint, and used.¹³ We also estimated the equation using regional dealer mint prices, national dealer mint and used prices, and online auction prices for never hinged stamps. Two specifications for each of these seven categories were estimated: a base model including only Quantity and Age, and an expanded model which adds the three characteristic dummy variables: High Denomination, Souvenir Sheet, and Farley Issue. The results for each estimation are shown in Table 5.¹⁴

Table 5.

Regression Results: Determinates of Price by Seller Category.

Variable	(1) Catalogue Never Hinged	(2) Catalogue Mint	(3) Catalogue Used	(4) Regional Dealer Mint	(5) National Dealer Mint	(6) National Dealer Used	(7) Auction Never Hinged
Panel A: Base Model
Constant	−52.009^*** (−20.062)	−45.638^*** (−21.442)	−28.419^*** (−15.079)	−44.846^*** (−20.753)	−44.255^*** (−21.929)	−23.608^*** (−12.975)	−53.218^*** (−22.705)
lnQuantity	−0.508^*** (−15.852)	−0.454^*** (−17.233)	−0.589^*** (−25.193)	−0.450^*** (−16.851)	−0.460^*** (−18.438)	−0.692^*** (−30.772)	−0.427^*** (−14.726)
lnAge	13.628^*** (25.626)	11.9087^*** (27.272)	8.518^*** (22.033)	11.719^*** (26.435)	11.786^*** (28.470)	7.890^*** (21.138)	13.492^*** (28.061)
F-statistic	574.454	659.466	733.671	623.132	730.267	888.101	626.819
Adjusted R²	0.822	0.841	0.855	0.833	0.854	0.877	0.834
Panel B: Expanded Model
Constant	−54.619^*** (−20.385)	−44.589^*** (21.305)	−25.760^*** (−13.400)	−43.470^*** (−20.574)	−43.394^*** (−22.283)	−21.509^*** (−11.693)	−52.953^*** (−21.710)
lnQuantity	−0.361^*** (−9.350)	−0.372^*** (−12.340)	−0.592^*** (−21.396)	−0.370^*** (−12.160)	−0.377^*** (−13.446)	−0.667^*** (−25.177)	−0.350^*** (−9.954)
lnAge	13.561^*** (25.518)	11.307^*** (27.241)	7.903^*** (20.728)	11.0503^*** (26.368)	11.223^*** (29.056)	7.303^*** (20.019)	13.091^*** (27.060)
High denomination	0.998^*** (6.383)	0.855^*** (7.005)	0.339^*** (3.025)	0.889^*** (7.211)	0.838^*** (7.378)	0.471^*** (4.391)	0.701^*** (4.928)
Souvenir sheet	1.595^*** (4.485)	1.612^*** (5.805)	1.095^*** (4.294)	1.594^*** (5.685)	1.679^*** (6.497)	1.181^*** (4.839)	1.599^*** (4.939)
Farley Issue	0.392 (1.585)	−0.555^*** (−2.874)	−0.962^*** (−5.424)	−0.607^*** (−3.111)	−0.550^*** (−3.062)	−0.802^*** (−4.722)	−0.443^** (−1.968)
F-statistic	281.899	361.093	368.219	346.497	415.285	452.170	301.895
Adjusted R²	0.849	0.879	0.881	0.874	0.893	0.901	0.858

( ) – t-Statistic. *** – Statistically significant at the .01 level, two-tailed test. ** – Statistically significant at the .05 level, two-tailed test.

Panel A of Table 5 reports the results for the base model. Across all seven of the estimated equations, this specification explains more than eighty percent of the observed variations in price with the adjusted R² values ranging from 0.822 to 0.877. Furthermore, the coefficients for both the Quantity and Age independent variables carry the expected sign and are statistically significant in each estimated equation. Catalogue values and retail prices for early U.S. commemorative stamps are negatively correlated with the number of stamps originally produced and positively correlated with the age of the issue. The results for retail price are very consistent across seller categories in the base model. For both regional and national dealers, a one percent change in the quantity of mint stamps produced is expected to result in just less than a one one-half percent lower retail price (columns (4) and (5)), holding all else constant. A slightly weaker relationship is seen for never hinged stamps sold at auction (column (7)). National dealers appear to be a bit more sensitive to quantity issued when pricing used stamps. The estimated results in column (6) reveal an elasticity coefficient of 0.692 for this category of dealer and stamp condition. In line with Schnitzel’s earlier findings, we estimate that the age of a stamp issue has a stronger impact on its retail value than the quantity originally produced. Again, the results for mint stamps are consistent across both regional and national dealers. In both cases, a one percent change in age is predicted to result in more than an eleven percent higher price (columns (4) and (5)), all else held constant. Age is even more important for never hinged stamps at auction where a one percent change in age is expected to result in a higher price of nearly 13.5% (column (7)). The effect of Age on used stamps is considerably less where the coefficient for national dealers is only 7.89 (column (6)).

Turning to the results for the expanded model reported in Panel B of Table 5, we see that the addition of the categorical variables increases the explanatory power of each equation. The adjusted R² values for the expanded model equations range from 0.849 to 0.901. With one exception, each of the independent variables obtain a coefficient of the expected sign and statistical significance. Only the Farley Issue coefficient in the Catalog Never Hinged equation is insignificant (column (1)). In all of the other equations, the Farley Issue coefficient is negative reflecting the wide distribution and speculative buying of these stamps after the national scandal. However, the Souvenir Sheet coefficients are consistently positive and indicate that these panes command a premium price of about one and half percent, ceteris paribus. The effect is weakest for used examples of Souvenir Sheets (column (6)). Also as expected, stamps issued in denominations above the then-prevailing first class letter rate command a premium retail price. However, the impact is relatively low, being less than one percent for mint stamps (columns (4) and (5)) and about half that for used High Denomination issues sold by national dealers (column (6)), all else being equal.

Across all seven expanded market equations, the estimated coefficients for the Quantity and Age variables are remarkably consistent in relative magnitude with those in the base model. For each equation, the coefficients in the expanded model are generally about one-half point smaller, or less, than the coefficients in the base model. This indicates that the coefficients for Quantity and Age in the base model also capture part of the impact of the added categorical variables included in the expanded model. The consistency in the relative magnitudes, the high degree of statistical significance for all explanatory variables, and the relatively high adjusted R² values indicate that the model is robust across the various specifications for the different categories of sellers and stamp conditions.

It is important to note that the pattern of coefficients across the retail price equations, columns (4) through (7) follows the pattern reflected in the catalog value equations, columns (1) through (3).¹⁵ We also know from Tables 1 and 2 that mean prices vary significantly between different categories of sellers and that catalogue values are highly correlated with retail prices observed in the marketplace. The results in Table 4 indicate that the correlation between catalogue prices and observed retail prices are rooted in the same explanatory variables and the catalogers and sellers respond to differences in these explanatory variables in similar magnitudes. Taken together, these results suggest that the significant difference in prices between categories of sellers may result from each category of seller operating in a market effectively separated from the others and with its own equilibrium price level. This conclusion is consistent for a market where buyers are acting on diverse motivations and where sellers may seek to exploit differences in buyer knowledge.

Conclusion

Close examination of the market for collectible vintage postage stamps reveals a significant degree of heterogeneity in prices across different categories of sellers. Specifically, we find that mean prices for large national stamp dealers are significantly higher than those for representative regional dealers across a sample of early U.S. commemorative stamps of like quality. In addition, national dealer prices for high quality never hinged stamps are also significantly greater than those realized through online philatelic auctions. Our regression model reveals that sales prices are primarily determined by a stamp’s quantity, age, and certain issue characteristics. We find that these determinates are consistent in magnitude and degree of significance across the different categories of sellers and auction sales. Furthermore, these results are also consistent with the determination of listed catalogue values across different stamp conditions—never hinged, mint, and used.

Our results are indicative of a market that has been partitioned by sellers across different categories of buyers, resulting in the deviation in mean prices seen across dealer types. The academic literature acknowledges the existence of significant variations in the underlying motivations that drive collecting behavior and that this results in differences in willingness to pay for individual collectors. Our results suggest that national dealers may successfully segment the market and target those collectors willing to pay higher prices. Casual empiricism lends credence to this conclusion as it can easily be observed that national dealers regularly advertise and promote their products and services in different forums than smaller regional dealers do. For example, the largest national dealer often advertises in general interest periodicals and newspaper supplements and routinely promote stamps that are of little value or interest to serious philatelists. Often these ads are targeted to introduce non-collectors to the hobby. However, those with little or no knowledge of the collectible stamp market and who respond to these promotions are unaware of the stamps’ market value and end up buying stamps from the dealer’s sales catalogue at a premium price.¹⁶

Because information and knowledge are critical for both buyers and sellers in the collectible stamp market, we acknowledge that our results may warrant other explanations. The value of a specific stamp may rely on characteristics not readily apparent to the novice eye—the size of the perforations, the type of paper, the shade of color, etc.—and it can take years of study and experience to become an expert. This situation creates an opportunity for exploitation on either side of the market. Most commonly this occurs when sellers misrepresent a stamp. In fact, Dewan and Hsu (2004) found that online stamp auction prices were 10 to 15% lower than dealer prices due to reputational effects of auction sellers. This suggests that some buyers are willing to pay a premium for the assurance that what they purchase is truthfully described. Thus, stamp buyers may naturally partition the marketplace based on their willingness to pay for accurate transactions. In a similar manner, the differences in prices we observe are also consistent with possible systematic variations in the true quality of stamps sold across dealer categories. To the extent possible, in making our comparisons we attempted to hold stamp condition and quality constant by using the Scott Catalogue definition of grade but assigning a stamp grade is necessarily subjective and may differ across dealers. Systematic variations in grading between regional and national dealers, once known to collectors, would result in observed price differences.¹⁷

Undoubtedly, these alternatives explanations, and perhaps others, play some role in the pricing of collectible stamps across seller categories as we have described and analyzed here. For example, if the potential return to financial investments in collectible stamps has diminished in recent years, this may push dealers to emphasize sales to collectors less sensitive to acquisition costs. Given the complexity of the philatelic marketplace, additional research is needed to sort out and identify the relative importance of the market factors, including investment potential, that result in the observed differences in the prices of collectible stamps.

Footnotes

Acknowledgments

The authors thank the journal’s editorial staff for asking a stamp collecting economist to provide an expert review of our paper. The referee’s comments were valuable and much appreciated. Special thanks also extended to Marybeth Grimes for editorial assistance.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Paul W. Grimes

Notes

Author Biographies

Paul W. Grimes is Professor of Economics and Dean, Kelce College of Business at Pittsburg State University, and Emeritus Professor of Economics, College of Business at Mississippi State University. His research focuses on issues in economic education, labor economics, public policy, and sports economics. As a long-time philatelist, he specializes in U.S. stamps and postal stationery and is a member of the American Philatelic Society.

Larry R. Woodward holds a Ph.D. from the University of Arkansas and is Professor of Finance, Kelce College of Business at Pittsburg State University and Emeritus Professor of Finance at the University of Mary Hardin-Baylor. His research interests include real estate, managerial finance, forecasting, and financial management. He actively provides arbitrage services by buying and selling classic world-wide and U.S. issues in the philatelic marketplace.

Myles Clark is a Graduate Research Assistant in the Kelce College of Business at Pittsburg State University. He earned his BBA in Economics and Finance in 2021 and will complete his Master of Business Administration degree in 2023. This is his first foray into the world of stamp collecting.

References

American Stamp Dealers Association (2022). We are the hobby builders! Buy and sell with confidence. https://www.americanstampdealer.com/

Apfelbaum Incorporated (2022). The state of stamp collecting today. https://www.apfelbauminc.com/guide-to-sell-a-stamp-collection/chapter-2-state-of-stamp-collecting

Belk

R. W.

(1995). Collecting as luxury consumption: Effects on individuals and households. Journal of Economic Psychology, 16(3), 477–490. https://doi.org/10.1016/0167-4870(95)98956-x

Bigalke

(2019). A surprising number of stamp stores still dot the United States. Linn’s Stamp News. https://www.linns.com/news/us-stamps-postal-history/a-surprising-number-of-stamp-stores-still-dot-the-united-states

Burton

B. J.

Jacobsen

J. P.

(1999). Measuring the returns on investments in collectibles. Journal of Economic Perspectives, 13(4), 193–212. https://doi.org/10.1257/jep.13.4.193

Cardell

N. S.

Kling

J. L.

Petry

(1995). Stamp returns and economic factors. Southern Economic Journal, 62(2), 411–427. https://doi.org/10.2307/1060693

Chen

(2012). Stamp characteristics and long-term return after issuance: Evidence from new China stamps. China Financial Review International, 2(4), 351–376. https://doi.org/10.1108/20441391211252148

Chubb Limited (2022). 8 things to consider when collecting stamps. https://www.chubb.com/us-en/individuals-families/resources/8-things-to-consider-when-collecting-stamps.html

CNBC (2010). Stamp market tougher than it looks. https://www.cnbc.com/id/39443781

10.

Dewan

Hsu

(2004). Adverse selection in electronic markets: Evidence from online stamp auctions. Journal of Industrial Economics, 52(4), 497–516. https://doi.org/10.1111/j.0022-1821.2004.00237.x

11.

Dimson

Spaenjers

(2011). Ex post: The investment performance of collectible stamps. Journal of Financial Economics, 100(2), 443–458. https://doi.org/10.1016/j.jfineco.2010.12.005

12.

Franses

P. H.

Knecht

(2016). The late 1970s bubble in Dutch collectible postage stamps. Empirical Economics, 50(4), 1215–1228. https://doi.org/10.1007/s00181-015-0974-3

13.

Gelber

S. M.

(1992). Free market metaphor: The historical dynamics of stamp collecting. Comparative Studies in Society and History, 34(4), 742–769. https://doi.org/10.1017/s0010417500018077

14.

Grable

J. E.

Watkins

(2016). Quantifying the value of collecting: Implications for financial advisors. Journal of Family and Economic Issues, 37(4), 639–648. https://doi.org/10.1007/s10834-015-9471-2

15.

Henry Gitner Philatelists, Incorporated (2002). What is “discount postage”. https://www.hgitner.com/rNewsDetails1.asp?NewsID=89

16.

Hotchner

J. M.

(2020). The big four expertizing groups in the United States. Linn’s Stamp News. https://www.linns.com/news/us-stamps-postal-history/the-big-four-expertizing-groups-in-the-united-states

17.

Huang

(2001). Asymmetric participation in China’s stamp market: Hobbyists and investors. Applied Economics, 33(8), 1039–1044. https://doi.org/10.1080/00036840122444

18.

Kish

R. J.

Hogan

K. M.

(2000). Duck stamp prints – bubbles from a federally sponsored program. Pennsylvania Economics Review, 9(1), 5–9.

19.

McIntosh

W. D.

Schmeichel

(2004). Collectors and collecting: A social psychological perspective. Leisure Sciences, 26(1), 85–97. https://doi.org/10.1080/01490400490272639

20.

Schnitzel

(1979). A note on the philatelic demand for postage stamps. Southern Economic Journal, 45(4), 1261–1265. https://doi.org/10.2307/1056972

21.

Scott Specialized Catalogue of United States Stamps & Covers 2022 (100th ed.) . (2021). Sydney, OH: Amos Media.

22.

Schwaneberger Verlag (2022). Michel online shop. https://www.briefmarken.de/michelshop/en/michel-online

23.

Smithsonian National Postal Museum (2022a). Farley’s follies. https://postalmuseum.si.edu/exhibition/farley%E2%80%99s-follies

24.

Smithsonian National Postal Museum (2022b). Stamp collecting. https://postalmuseum.si.edu/stamp-collecting

25.

Stanley Gibbons Limited (2022). Stamp catalogues. https://www.stanleygibbons.com/shop/publications/stamp-catalogues

26.

Taylor

W. M.

(1983). The estimation of quality-adjusted rates of return in stamp auctions. Journal of Finance, 38(4), 1095–1110. https://doi.org/10.1111/j.1540-6261.1983.tb02285.x

27.

United States Postal Service (2002). Postal history, rates for domestic letters since 1863. https://about.usps.com/who/profile/history/domestic-letter-rates-since-1863.htm

28.

Ursprung

H. W.

(2021). Financal returns to collecting rare political economy books. European Journal of Political Economy, 70, 102139. https://doi.org/10.1016/j.ejpoleco.2021.102139

29.

Van der Grijp

(2002). Passion and profit: The world of amateur traders in philately. Journal of Material Culture, 7(1), 23–47. https://doi.org/10.1177/1359183502007001304

30.

Veld

Veld-Merkoulova

Y. V.

(2007). Portfolio diversification benefits of investing in stamps. Journal of Alternative Investments, 10(1), 56–61. https://doi.org/10.3905/jai.2007.688993

31.

Yvert et Tellier (2022). Catalogues des timbres. https://www.yvert.com/