Question:
Please excuse my economic illiteracy, I do not study economics. I am a San Francisco Firefighter looking for a solution to a problem with rising costs in the very small and limited market of legacy fire helmets. Leather helmets manufactured before the 1990s are an antique collectors item for some, but in San Francisco, where history and tradition run deep, we still have these older legacy models in service. More and more helmets fall into collectors hands over the years, and as we try to reclaim them the price has skyrocketed. I know enough to generally see market forces at work, but is there anything to do about it? Guys are being priced out of a necessity. Thank you.Answer:
Unfortunately, what you are experiencing is a perfect example of inelastic supply (the quantity of helmets available doesn’t change much with price). The market is essentially working exactly as you described: there’s a fixed and possibly declining supply of pre-1990s leather helmets with increasing collector demand. Firefighters are now competing against people who view the helmets as appreciating assets rather than essential equipment.
Normally, when prices increase, manufacturers produce more which increases supply and then price will eventually stabilize. In this case the normal market mechanism breaks down because no one is making these vintage helmets, and more and more helmets are either being damaged from use or exiting the market into collections. You’re stuck in a situation where supply can only go down, never up.
One potential option is to leverage the purchasing power of the SFFD. Essentially, individual firefighters are “price-takers” because they have to accept whatever price collectors demand because they have no leverage and can be ignored. The SFFD as an institution can be a “price-maker” because it is a large, reliable, repeat customer that sellers want to maintain relationships with. The SFFD can therefore negotiate, make bulk offers, and have more ability to set terms. This is an example of monopsony power.
Further, as you mentioned, collectors likely know more about helmet availability, typical prices, and market conditions than any individual firefighter. This is an example of information asymmetry, and it favors the collectors. Having the SFFD take the reins will level the playing field so to speak while eliminating firefighters driving up prices by competing with each other.
