The market for flat-screen sets is truly unique, since the price of a new television falls almost every year. So why are used TVs some of the most relatively expensive electronics in the secondary market?
If you want to buy a used television, you are in for a world of
hurt. As you peruse through the Craigslist listings for used TVs, you
may notice something surprising. The prices are kind of high. Do a
quick check on Amazon and your suspicions will be confirmed. Lots of
people try to sell their used television for more than that same TV
would cost brand new.
That doesn't make any sense. No one would ever buy a used TV for $800 when they could buy the new one under warranty for $750. A market like this cannot possibly function properly. What is going on in the market for used TVs?
THE USED TV CHALLENGE
At the risk of stating the obvious, a used television should always cost less than its new counterpart. First, someone else has already used it. Second, the condition and quality of a used item is uncertain. The seller could be getting rid of the TV because it is a lemon. Finally, buying a used TV from some stranger's living room is less convenient than buying with one click on Amazon or at a Best Buy showroom. A used TV is strictly inferior to a new one and should be priced accordingly.
To test our suspicions that something was amiss in the used television market, we compared used TV prices to the prices of buying them new instead. We looked at the discount for "buying used" for televisions versus headphones and phones (categories we've previously studied):
People offer to sell their used televisions on Craigslist at a 14% discount to buying the same TV new. On the other hand, used headphones and phones are sold at a ~30% discount to new. A 30% discount for buying used feels relatively fair, but 14% barely seems worth it. Taking a deeper looker at specific used TV models:
It turns out, people have very inflated expectations for how much they call sell their used TV. Only 3 of the 26 televisions we analyzed were discounted more than 30% versus a new TV. Insanely, for some TV models, the median used price is higher than the new market price.
Would a 14% discount entice you to buy a used television that might be a dud? Even if the average used TV seller offers this measly discount, plenty of people are out there trying to sell their TVs for a price higher than the new price on Amazon. What gives?
THE INCREDIBLE SHRINKING PRICE OF TVs
The typical Craigslist TV ad reads like this: "55 inch Samsung HD TV - $1000 . . . We bought this TV in August 2011 at the beginning of the school year for $1500."
The seller thinks: "I bought it for $1500, I'm being very fair discounting it 33% for the next owner." Unfortunately, the seller does not realize that during the 9 months they've been using the TV, it no longer costs $1500 new. Most likely you can buy that TV new today for $1000 or less.
People appear to be anchored to the price they originally paid for the television, not the current market price. This leaves them blind to the fact that the price of a new TV is always dropping precipitously. CNN illustrates: