Question

Which letter is likely to be worth more: one penned by Lincoln or one written by his assassin, John Wilkes Booth? Lincoln is one of the greatest presidents, and many people collect anything he wrote. The demand for letters written by Lincoln surely would seem to be much greater than the demand for letters written by Booth. Yet, when R.M. Smythe and Co. auctioned off on the same day a letter written by Lincoln and a letter written by Booth, the Booth letter sold for $31,050, and the Lincoln letter sold for only $21,850. Explain how the Booth letter has a higher market price than the Lincoln letter, even though the demand for letters written by Lincoln is greater than the demand for letters written by Booth.

Answer 1

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The price setting in the above case is bsiccally an interaction of demand and supply. The price of Lincoln letters is less despite the high demand because of a variety of reasons. Firstly, the number of letters which have historic value penned by Lincoln is much higher than Booth which means that the supply of letters under Lincoln's name is greater.

However, the supply of letters under Booth which possess antique value are rare. The demand is of much higher proportion for his letters in comparison to the supply. This drives the price really high compared to Lincoln's letters simply based on the fact that the relative demand-supply ratio is much higher for Booth's letters.