The Economics of Beanie Babies

Here’s an interesting passage from Ty, Inc. v. Publications Int’l, Ltd., a case I recently read in Introduction to Intellectual Property. The case is concerning whether Publications Int’l is violating Ty’s copyright by publishing books with images of Ty’s Beanie Babies. The description of Ty’s marketing strategy is used to set up the differences and similarities between children’s and collectors’ approach.

As a marketing gimmick, Ty deliberately creates a shortage in each Beanie Baby by selling it at a very low price and not producing enough copies to clear the market at that price. As a result, a secondary market is created, just like the secondary market in works of art. The secondary market gives widespread publicity to Beanie Babies, and the shortage that creates the secondary market stampedes children into nagging their parents to buy them the latest Beanie Babies, lest they be humiliated by not possessing the Beanie Babies that their peers possess. The appeal is to the competitive conformity of children – but also to the mentality of collectors.

As far as I’m concerned, the best use for Beanie Babies was to wipe the dust off computer and TV screens.

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