If you have any affection whatsoever toward Nintendo, chances are you own at least one amiibo. Nintendo's answer to the toys-to-life segment of the electronics business dropped into the middle of a field with only two other competitors: Skylanders and Disney Infinity.
Both of those lines saw their peak relevancy in the general public-conscious much higher than the amiibo, but when it comes to collectability, amiibo are the current kings of the hill. Store exclusives, limited runs, and a lack of anything concrete in the way of communication from Big N have helped to whip amiibo frenzy to an adorable, collectible froth. There's a lot that can be learned from the amiibo situation, however, especially when it comes to basic economic principles
Whoa, whoa, where are you going? This isn't a piece about economics, it's about amiibo and how the current amiibo craze is a great illustration of economic principles in action. Sure, there are going to be a few econ terms bandied about, but all in the service of explaining just what the hell is happening with amiibo. The perhaps intentionally limited supply of certain figures, the grey-market scalpers, and the insanely fast time period between when sales go live and certain figures sell out are all great examples of applied economics in action.
First, a little backstory on a tiny toy company called Nintendo. The company started off as a maker of Japanese playing cards, but when Hiroshi Yamauchi took over as president, he quickly realized playing cards weren't exactly going to set the world on fire. Yamauchi began to experiment with other products after a Disney licensing deal infused the company with some much needed cash. After throwing enough at the wall, toymaking eventually stuck and Nintendo, with the help of engineer Gunpei Yokoi, had their first big toy success in 1966 with the introduction of the Ultra-Hand. In the '70s Nintendo started making more commercially successful electronic games and in the '80s revived and then dominated the home console market with the Nintendo Entertainment System.
The NES was an insanely popular product, and in an effort to prevent the market from being flooded with crappy software, Nintendo tightly controlled licensing. In fact, Nintendo's tight control of its home console system brought with it a class action lawsuit accusing Nintendo of playing fast and loose with antitrust laws. While a settlement was reached, Nintendo denied any wrongdoing in the affair. One of the injunctions stated that Nintendo would cease and desist from "Reducing the supply of Nintendo Products to any dealer."
Anyone who has tried to get a particularly rare amiibo, especially a retailer specific figure like GameStop's Ness or Walmart's Golden Mario has probably wondered if Nintendo is up to its old tricks again. Is it intentionally choking out supply to raise demand? If so, it's a risky maneuver that could pay off. The limited availability could just be Nintendo playing it extra careful with the untested amiibo line, but there is some logic behind those hard-to-find, retailer-exclusives that sort-of almost fit the bill for the trickery Nintendo was accused of in the past.
If you really want that rare figure, you'll visit a physical retailer to see if it's there and if it isn't, well you're in the store anyway. You might as well make the best of it and buy something. After all, you spent the time to go there, you don't want to make it a total waste of time, right? In economics, such a scenario is known as a sunk cost fallacy.
You figure since you spent the time and effort to go to the store, you should make the most of it, and you end up buying something maybe you didn't even want or need. Never mind the countless psychological tricks being used to get your spending-senses tingling, you've fallen for the sunk cost fallacy. You didn't get what you came for, but since you spent the time, you might as well get something. Maybe a less-rare or non-retailer exclusive amiibo is there instead, and so you buy it to try to salvage the trip. The cost, your time, is gone. It can never be recovered. But people fall for it time and time again with any cost, whether it be money, time, or effort. It's a win for Nintendo and it's a win for the retailer.
Why couldn't you get that King Dedede, though? Simple supply and demand. King Dedede wasn't a store exclusive, similar to Wii Fit Trainer or Fox McCloud, but good luck finding one. The problem was that for the limited runs on certain, less mainstream figures, the price was simply too low. If you look at a supply-demand curve… hey, come back!
All other factors remaining equal, the law of supply and demand says that the higher the price of something, the less people will want of it. What happens when the price is too low, then? Totally the opposite: people want more. Now when you throw supply into the equation, you see how prices are affected. That $13 amiibo flies out of the store because people really want it, and since it's $13 they'll grab all they can and turn them around on auction sites. But since supply is limited, they disappear from retailers and people are left empty handed.
That stems from the fact that every amiibo is sold at a set price, but the supply and consumer demand differs from figure to figure. In the magical, wonderful world of your economics 101 classroom, the magical place where the supply curve and the demand curve intersect is the equilibrium price. It's where price and quantity are in perfect balance, a harmonious state that exists on the whiteboards of Econ courses and in the pages of books the world over.
Those eBay auctions where Jigglypuff preorders are going for $40 are the closest thing we can get to an equilibrium price for amiibo. It might be a little higher since there are other costs involved with even getting your hands on one to begin with. For example, the people who are selling the preorders had to spend some of their time to secure one for sale in the first place, and honestly, since the price was so out of whack with the supply, basically everyone who had the chance to buy more than one certainly did.
Price has another magical power: it rations available resources. In this case, sweet, rare amiibo. When the price is out of equilibrium, you end up with shortages. Since the market wants to spend $40 on Jigglypuff, but the sale price was only $13, people bought them quickly and in large numbers. Even people who didn't want to buy one knew that flipping them was going to be a profitable scheme, so they bought as many as the could. At the equilibrium price, people only buy what they want in quantities they want. It's really like magic, only it's science. A social science, sure, so it's not one of the cooler sciences, but still. Science is right there in the name.
It sucks we can't get the amiibo we want when we want them, for a price we want. But on the bright side, the whole situation is a great chance to learn about the dismal science of economics, and so all is not lost. And really, isn't it kind of fitting to have Smash Bros. characters show off the concept of the invisible hand?