One of the most challenging decisions Princeton seniors must make is what to write their senior thesis on –– you will spend countless hours working on it throughout your senior year, after all. Of course you are limited to a topic related to your major, but there is a certain degree of freedom you are given, depending on how you can justify its relation to a concept central to your major. In earnest, your thesis is what you want it to be. Because of this, I have decided to research the economic implications behind something I have been collecting since my childhood: Pokémon Cards.
At first, you may think that Pokémon Cards (or trading cards in general) are merely childhood collectables, but you may be surprised by the immense value and vibrant marketplace surrounding these assets. In fact, a Pikachu Illustration card sold for a whopping ~$5.25 million back in 2021. Like many assets, Pokémon cards revolve in market cycles based on popularity and other factors like supply and demand. Currently, Pokémon cards are hard to find in retail stores or online at retail price –– market price places many of these products at a steep premium varying from 10% to double retail price.
Because of this, I thought it would be really interesting to take a deeper dive into the Pokémon market and understand what economic principles are most prevalent. My thesis investigates the economic structure and asset-like behavior of the Pokémon trading card market, with a focus on how pricing, scarcity, grading, and collector behavior interact to produce financial returns and market cycles. The main question I seek to answer is: To what extent do Pokémon cards behave like a financial asset class, and what economic forces –– such as supply dynamics, grading shocks, hype cycles, and speculative behavior –– drive returns and market volatility? My main hypotheses include that 1) High end/ultra rare cards act more as high end art market pieces, with auction sales being driven by specific consumer desire rather and fundamental values, and 2) Market segmentation between sealed vs raw, graded vs ungraded, and Japanese vs English cards creates submarkets that create differences in liquidity and unique arbitrage opportunities that differ from the stock market.
One of the other interesting things about this exploration is the possibility to travel for research. I am currently applying for funding to travel to Japan to research the Pokémon market where it was created. In doing so, I hope to better understand the secondary resale market, and how differences in unopened products, quality, language, and stock influence the current market environment. You will definitely see another blog about my travels if I am awarded funding, so stay tuned!