Scavenging for rationality at the Camberwell Sunday Market

In economics, we are often presented with the benchmark of a perfectly competitive market, in which a large number of buyers and sellers trade homogenous products with perfect knowledge regarding price and utility. The only feature Camberwell Sunday Market shares with this benchmark is a large number of buyers and sellers.

Every Sunday from 7.30 am to 1 pm, over 400 casual stallholders will cart out an array of second hand items. For the most part, these consist of designer labels that were deemed ‘out of season’ by Vogue a month after they were purchased, much-bought-rarely-read Booker prize winning novels, and antiques salvaged from retired or deceased relatives.

A large proportion of the stall holders are one-off vendors who come to the market with the misguided notion that the goods they purchased at a premium with their hard earned salaries should be worth something.

Last week, the author became one such vendor and was quickly disabused of these notions. However interesting and important economic phenomena were observed, giving rise to the following hypothesis: the utility profile of the typical shopper at the Camberwell Sunday Market is dynamic, occurring in three phases.

The utility profile of the typical shopper at each phase, namely the ‘Fashionista,’ the ‘Browsing Bruncher’ and the ‘Scavenger,’ will be discussed in turn.

Utility, the idea that individuals seek to maximise their benefits and minimise their costs, is largely grounded in choice theory.

Utility is a representation of preferences over some set of goods and services. Graphically these preferences are used to create an ‘indifference curve’ of combinations of goods and services from which an individual derives the same satisfaction, or utility level.

Axiomatically, more is always better. Hence the further a particular curve is from the origin, the greater the satisfaction level achieved.

For example, Figure 1 graphs an individual’s indifference curves for comedy festival tickets against other goods and services.

This individual is equally happy with any combination of Comedy Festival tickets and other goods that appear along the green line (eg points A, B and C). This has a utility level of 2.

The individual receives a lower utility than 2 at any point along the blue line (eg point E) which only has a utility level of 1. Meanwhile the individual receives a higher utility than 2 at any point along the red line (eg point D).

In most cases, the indifference curves are bowed inwards as the marginal rate of substitution (MRS)—the rate at which you are willing to give up one good in exchange for another while maintaining the same happiness level—decreases as one moves down the curve.

Going back to Camberwell Sunday Market, it is a very specific type of individual who will set their alarm clock on a Sunday morning to 6 am in order to have first pick of the stalls.  I have designated this category of person the ‘Fashionistas, Nerds & Collectors.’

As our stall consisted mostly of second-hand clothing from well-known designers and brands, the shoppers that approached us in Phase 1 were primarily a subset of this group: The Fashionista.

The indifference curve of the typical Fashionista is presented in Figure 2. Whilst these shoppers generally prefer new items, they don’t mind substituting for quality second hand items provided there is a substantial mark down.

These people will buy several of your goods for a decent price and have you feeling like you will walk away from the stall with at least a thousand bucks. This feeling will not last.

At mid-morning the mood begins to change and a new kind of shopper comes to dominate the market. The Brunch Browsers visit the market as part of a social ritual which takes in brunch with friends at a nearby café followed by an hour or so of browsing the surrounding stalls.

Brunch Browsers are typically local and affluent, identifiable by designer sunglasses worn even on the most overcast of days and their expensive Danish casual shoes.

The Brunch Browser’s indifference curves are bowed inwards (see Figure 4), as the marginal rate of substitution decreases along the curve.

Put bluntly, after their initial whimsical purchase (which can prove quite lucrative for the seller) the Brunch Browser’s marginal benefit enters a steep decline. Getting money from these people is like getting blood from stone and you will need to keep offering them better and better deals to offload your stall items.

Every tale has its villain. In mine, it is the Scavengers. These people wait until less than an hour before official market close at 12.30 pm. The Scavengers will only buy things at a pre-determined acceptable price (always below one dollar). For this reason their utility is also graphed as a set of straight lines but with a barely discernible slope.

These people are so tight they would sell their grandmother for a bus ticket. They have a knack for spotting the fresh meat in the stall and will circle until you are so demoralised that you will comply.

Once the Scavengers come into play, strange things begin happen. Your hung-over fellow stall holder will sell a Satch corporate suit, for which she paid more than $500, for just 50c and throw in a scarf as a gift with purchase.

To digress from this highly scientific investigation into broader philosophy, it appears to the author that ‘The Scavengers’ did not display the characteristics traditionally associated with utility.

As famously put by the economist Paul Samuelson:

It was observed that the Scavengers did not appear to be motivated by desire or want for the good itself, but by the excitement of obtaining goods at their preferred price level (ie getting a bargain). Volume, whether two or twenty items, was largely irrelevant to the Scavenger. This raises the question whether traditional concepts of utility are suitable for analysing their preferences.  The author’s interpretation of Scavenger behaviour, which deviates from traditional microeconomics, appears in Figure 8.

More broadly, it is self-evident that we live in an era of ever increasing standards of living in developed countries. Increasingly, how we exercise our preferences can be more pertinent to our choices than what we actually prefer to buy. How central should the notion of scarcity be in a marketplace notable primarily for its excess? These are questions that warrant further investigation.

[1] Marshall, A. ‘Principles of Economics. An introductory volume (8th ed.) (1920, (London Macmillan) p 78.