In part 1 of this series we explored the world of finance and poker through two books I consider must reads. We explored that as soon as we see something as a potential ‘gain’, our mind differently from when we see something as a potential ‘risk’. This can affect our judgment as easy as in a Magic game as soon as you are playing to win or worse: playing to survive.
In this article I look to examine how we think as Magic traders and how to improve ourselves.
Endowment Effect & Sentimental Value
Ever stumble across casual players, having casual chat in an EDH game, when someone takes a long turn and you mention that you'd like to do some trades. You and your potential trading partner exchange binders and allow the trading process to begin, where you both start picking cards.
The problem is that every card that you are interested in, for whatever reason, your trading partner’s facial expression shows a sign of doubt and regret. "Eh. I'm not sure if I can trade that one, I started playing Magic with that card in my first deck."
More than likely, you have encountered this or you have said it once yourself. It is often very hard to get the card from this player, often first being hesitant but later willing to let it go for a number far higher than any reasonable index price.
This is a classic example of how different value can appear from separate points of views. Various studies have been done on this phenomena because it is interesting why people put in a high selling price for product X while they would buy the exact same product X for a significant lower amount.
A study done by Kahneman, Knetsch and Thaler (1990) illustrates through an experiment that there is a gap between the valuations of a simple mug when selling and buying. The sellers – who received the mug therefore ‘own’ them – were asked what the lowest sum would be to sell the mug. At the same time the buyers were asked what the highest sum they would have to spend to acquire the mug.
The researchers concluded that the average selling price in this setting was twice as large as the average buying prices.
This gap between selling and buying prices can be related back to loss aversion. When people put value other than pure financial value into a certain card, they are seeing the card as a reminder of the good times they had with this particular piece of cardboard in a certain deck. Therefore trading it away can and most likely will feel as a bigger loss than they would get in exchange.
They also lose the right to play with the card until the exact same card is acquired somewhere else. This is big because, even when people trade away their card, I recommend looking at facial expressions as they are most likely not satisfied with the trade.
When aiming for longevity in trading, thus establishing new trade relationships, this can be bad news as the link with you – as a trader – and the pain of losing the card in a trade can easily be made.
Now Dan Ariely and Ziv Carmon also performed multiple experiments in 1998 regarding basketball tickets. Based on what they concluded in their research article, they argued that ‘marketers may want to consider influencing consumers’ choices and behavior via the perspective from which they evaluate a transaction’.
For example, consumers who buy new products can have a different focus from those who are upgrading existing products (ie. Giving up current products). Thus, framing new purchases as replacements rather than as new purchases can have a strong effect’.
Now how can this help us in making a successful and satisfying trade for both of the parties when trading with a person as I described in the beginning?
I would make a point to saying that the card they put sentimental value in is easily replaceable with other cards that are better or even slightly worse, mostly distracting them from the potential loss they are creating.
One can also say that the card is easily available at the LGS but, since you are not fond of buying cards, you prefer trading it with them. This is a weak argument so I wouldn’t recommend using it.
Last but not least, one can use the reference prices they use to gain some value by making this trade.
If you want to save the time, though, you can just pick other cards from his binder that your trading partner is not attached to.
The point I want to make with this phenomena is that one can apply this with almost everything. Dan Ariely wrote in his 2011 book The Upside of Irrationality that ‘the effort that we put into something does not just change the object. It changes us and the way we evaluate that object’.
The illustrations Dan Ariely wrote about are objects like Do It Yourself furniture and Origami. In Magic we can relate this to collectors who have been collecting for X years and suddenly need the money. Or Magic players who quit and put their bulk on Craigslist saying they paid X amount for it and they want something like 80-90% of X, which is absurd.
It is hard to convince these people, so I am mostly aiming to redirect their attention or to simply not put any effort in it.
On the trading floor
When on the trading floor at your local FNM, the trades of nowadays are completely different than when I was playing Magic even six years ago. Smartphones are common, price memory is a term people know about and so on.
I still think we can create an edge amongst any other trader without sharking them out. Some other Quiet Speculation writers have written about these small "Tricks of the Trade" that can make trading easier with your potential trading partner.
Most players are somehow attracted to a game of Magic, especially one involving 100 card Commander decks. I especially love pulling out my binder and opening it to the front page while playing a Magic game before any event starts. The front page of my binder is full of eye catching cards so if people are ‘’Wow’’-ing, I know they would likely make a good trading partner.
My front page ( as of 10-07-2012) consists of: Krenko, Mob Boss, Ajani Vengeant, Trostani, Selesnya's Voice, Ajani, Caller of the Pride, Bonfire of the Damned, Vraska the Unseen, Sword of Body and Mind, Yeva, Nature's Herald and Woodland Cemetery.
With Return to Ravnica, I am aiming to fill more Ravnica slots to the front and 2nd page to create a good first impression. What does your first page look like? I am very curious!
Another small trick others have mentioned is to deliberately say to your partner that you are fine with him taking out the cards he would like to acquire, own or have. I would phrase it as the ‘eBay effect’ where people feel more or less that they own the card already, hence putting more effort in it in actually getting it.
I can actually relate this back to the Sentimental Value section above, as people will value it higher whether it is a simple eBay auction or the card they really want and actually have in their hand. If you can talk like a cardealer, you can even mention how great the card can be in their deck so their mind is focused on all the great things they can do with it. It creates excitement, which is converted into even more sentimental value.
Now I would not call this sharking, but I am open to exchange opinions about this since I do think it is kind of borderline. But then again, if they are indeed going to make these great plays and are happy with the trade...
Last summer I visited one of my Poker friends in Estonia, where we went to a good restaurant. Afterwards we checked out, the waitress gave us the bill with some gummybears and peppermints. Now this waitress was not particularly cute, but I love gummybears. So I grabbed a handful and ate them.
Later on, when we were walking to the car, my friend asked me the reason restaurants hand out sweet candy to their customers in the end. I didn’t know at first and I was instantly curious to this trick, as he mentioned that people tip more and associate a sweet good feeling with the restaurant. As a Dutch person, I tipped that waitress 10-15% instead of rounding it up, which in the Netherlands is considered normal.
Strohmetz, Rind, Fisher and Lynn (2000) did an experiment regarding the use of candy to increase restaurant tipping. They successfully concluded that just a small piece of chocolate along with the check resulted in a bigger tip. They argue that this comes from the notion that any sweet candy enhances the positive mood the customers are in. The second reason is that customers tip more because they feel obligated to reciprocate when receiving an act of generosity. Last but not least, when the waitress gave the candy along with the check, the waitress is being perceived as very friendly which increases the chance to receive a bigger tip.
Now what does this all have to do with trading? Have you ever bought a bag of candy most people liked (I would not advocate black liquorice outside the Netherlands, it doesn’t work overseas!) and offered some to your trading partner after you finalized a trade? An unexpected act of generosity from you, while it cost you nothing, is something that has a big return of investment.
For example, when trading with someone and you just cannot find something for a small bulk rare in decent sized trade, you may just make the trade without the bulk rare. Then some moments later you walk up and give him the bulk rare anyway, saying something like ‘’You can use this card more than I can right now. I hope you have loads of fun with it!’’
This unexpected event would catch your trading partners off guard and they're more likely to reciprocate in later trades. Instead of being perceived a shark, you are seen as a person they can play a casual game with, get strategy tips and make some fun trades.
I suggest next time to buy some of candies, let go of bulk and try it out yourself. Focus on the long-term with this strategy, because it can take some time to make new trades, but the investment is well spent. One note to make is that if QS members buy/trade cards with each other, I tend to include Quiet Speculation in the shipment as well just for the fun, I already gave a couple of members these cards and they liked the fun!
On a completely separate topic, my Prerelease was superfun. I saw 80 players at one prerelease where they normally expect 50ish.
Oh, and the judge also said there was a cake for the participants. Although I thought the cake is a lie I was quite surprised to see this:
I made some very good trades, acquiring hard to get cards like Sylvan Library and Humility for some Standard staples. It was fun and I certainly am looking forward to Gatecrash Prereleases. I sincerely hope you had loads of fun at yours too!
One last thing, what would the ideal amount of tickets be to start out as a speculator on Magic Online? 100? 200?
Thank you for reading!
- D. Kahneman, J. Knetsch, R. Thaler. 1991. ''Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias'' Journal of Economic Perspectives 5 (Winter, 1991): 193-206.
- Z. Carmon, D. Ariely. 2000. ''Focusing on the forgone: How Value can appear so different to buyers and sellers'' Journal of Consumer Research 27 (December, 2000): 360-370
- D. Strohmetz et. al. 2000. ''Sweetening the Till: The Use of Candy to Increase Restaurant Tipping'' Journal of Applied Social Psychology 32 (2002): 300-309
- D. Ariely. 2011. The Upside of Irrationality, HarperCollinsPublishers, London