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In fact the colour of the yellow one is mustard, and it was very popular in the sixties, along with avocado. They matched the kitchens. Nobody had blue kitchens, so every blue phone on e-bay is prefaced with "very rare." Have a look at the kitchens here http://plan59.com/decor/decor_01.htm mustard mustard mustard.

Lloyd - excellent point. One quibble: avocado is definitely and emphatically 1970s not 1960s. Watch that 70s show - it's the avocado appliances that set the 70s mood.

I'm having a harder time believing that anyone would pay $90 for a mustard colour rotary phone.

On the other hand, there is a market for that sort of thing for movie and TV sets. There used to be a used appliance store down on Queen St. where you could buy vintage appliances for that purpose. For a number of years in the 90's my parents had an early 60's (I think) mustard Kelvinator with rotating chrome shelves (kinda like a lazy-susan in the fridge) that they'd picked up there. It was hideously inefficient, but had a rather ugly elegance to it.

Should the supply curve really be vertical?

I know there are a fixed number of certain colours of rotary dial phones in existence, but surely the number that people are willing to sell is affected by their prices?

Especially if one considers that people want working telephones, which may require some effort on the sellers part to clean up and maybe do some repair work.

Whitfit, I was wondering about that too. Another way to draw the supply curve is to think of anyone who currently owns a phone as a potential phone supplier. Then the supply curve is constructed by joining up the reservation prices of the current phone owners - the minimum amount that a person would accept for the sale of his/her phone.

The way that I've drawn the supply curves, anyone who currently owns a phone is shown as someone who is demanding to have a mustard or baby blue rotary dial phone - they're part of the demand curve, not the supply curve.

The reason I drew the curves the way that I did them is that this way it's easier to show how 1960s kitchen design trends influence the price of vintage phones 50 years later - i.e. that the total quantity of phones in existence matters. But it's certainly not the only way of doing things.

Could be price discrimination, too. On any given day the seller could be lucky enough to encounter a buyer that prefers blue and is willing to pay.

Couldn't it be that the seller is going for a contrast effect, intending to sell the yellow one by using a very high price on the blue one to make the yellow one seem reasonable by comparison?

Wow, that takes me back to my childhood. We had one of the blue phones well into the 1980s.

bork - it could be. Or it could be that this is just an attempt at framing - by pricing the blue phone at $160, the dealer leaves room for a potential buyer to haggle, get the price down to $120, and walk away thinking that they've just got this most amazing bargain.

Fmb - I don't know if price discrimination is exactly the right phrase, but you are onto something there. When a market is thin, a seller may not have any idea what the actual market-clearing price is, or how much any customer would be willing to pay for it. It might make sense to try to sell the phone at $160 for a few months, and then mark down the price if it doesn't sell. This flea market is in a very pretty touristy town in Eastern Ontario, so a lot of the customers will be people coming down from Ottawa for the day, as opposed to frequent visitors.

Whitfit/Frances: I haven't studied much economics so this may be totally off base, but coudldn't you say something like the supply curve is vertical but is conditional on the demand curve (as a whole). I.e. it is vertical in equilibrium. So if overall demand for yellow phones increased, and the demand curve as a whole shifted up, the supply curve might shift to the right (as more owners' reservation prices are met and they enter the market) but would remain vertical.

colinw - no, I don't think so.

Whitfit's suggested supply curve is appropriate for an exchange economy, where phones are coming on the market because people who own them are exchanging them for money and then other goods and services.

The vertical supply curve is appropriate when you're thinking about supply as representing production, that is, the number of phones that will be produced at a given price. Since there's this fixed stock of phones (unless you're talking about scouring Cuba for old phones, or using 3D printers to create new ones) the supply curve *representing the production of phones* is vertical.

Frances,

"Why should a blue phone have an asking price $70 higher than a yellow phone?"

Some people look at the price difference and say to themselves - "I can get that yellow phone at a real bargain"

Some people look at the price difference and say to themselves - "That blue phone must be better than the yellow phone because it costs more"

The seller may be trying to product differentiate even when there is no difference between the two products.

Not mustard but"golden harvest". A better name as already everybody knew that the decade of Fortrel pants,shag carpets and mustache ( as well as esalen and swinging clubs) would be washed out of memories...Any rationnal being would prefer the blue (periwinkle) to the abomination of "golden harvest ( I still have a gh fridge and range set in my back-up room to help me remember the follies of our youth).

Wasn't there a time when black Macs were more expensive than white Macs (or am I imagining this)? I suppose market segmentation and smart marketing can complicate demand and supply diagrams.

Frances: some provinces had only one phone company but QC had many : Bell had most of the territory but Québec Téléphone ( founded by francophones but by then a subsidiary of GTE) had large discontinuous segments. They were federally regulated. A Bell subsidiary ,Télébec,plus a few municipally owned smal outfit were provincialy regulated. Then, the Supreme Court ruled that everybody should be under federal jurisdiction. Télébec was folded into Bell and GTE sold Québec Tel to what had become Telus.

Simplest lesson: don't buy at that flea market.

E-Bay prices (just checked out of curiosity since I bought a fire-engine red one for 5$ at another flea market last summer). Most expensive e-bay Bell phone about $50 (0bids); a couple blue ones for $20. Did not see any yellow, but bright orange ones are there for cheap.

So this seller is pricing way out of the market anyways.
Indeed, seems like an example of an attempt to create his own 2-item market illusion, counting on the customers' lack of information. It could be that he does not even want to sell the phones. Once you see an old phone for $160, those brass candlesticks for $50 seem a real bargain.
A market "imperfection." (The quotation marks revealing my non-economists' thoughts on market models.)

fchaum - these phones are like one of those inkblot tests, where each person who looks at it sees something that reflects their own beliefs, pre-occupations, desires...

i think that, if I ever again am asked to set a micro theory comp, I will just put that picture on there and say "explain this."

Frances: "explain this". Next week homework in Intro Eco.

Another market "imperfection" is why everyone had to have the same phone: because you couldn't buy, you had to rent, as Frances said, but that's not the real reason.

Phone service was a local monopoly and the price for service was regulated. State/Provincial/Federal regulators allowed for recovery of capital and a small but not great return on investment. Essentially it was a bond with a fixed coupon and negotiable principal.

The principal amount was rigged/forced upward by the fiction that all phone equipment had to be bought at the monopoly's own hardware source (Northern Telecom, Western Electric, etc.). The prices were not competitive at all and of course they were inflated.

This is how AT&T (the overall parent in the US) continually reported a higher return on equity and investment then its subsidiaries.

"Simplest lesson: don't buy at that flea market."

Probably good advice in any situation.

I'm reminded of an old joke about the door-to-door salesman selling toothbrushes at $1 million a pop.

Customer: "You won't sell many toothbrushes at that price"
Salesman: "I only need to sell one".

The flea market vendor could probably sell lots of phones at $20 a pop, but he only needs one sucker to buy it at $160. No doubt the sucker will negotiate the vendor down to $100 and walk away thinking he fleeced the vendor. Hey, ignorance is bliss.

Worked for AT&T in the 70's. That yellow phone was quite common, but I don't think I ever saw that blue color on that kind of a phone. It was pretty common on the old Princess phone, however.

Just like what my daughter calls Brady Bunch colors (dark brown, burnt orange) were restricted to trimlines (which cost more) when they came out, I believe in 1979.

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