Do Non-Fungible Tokens (NFTs) Affect Prices of Physical Products? Evidence from Trading Card Collectibles (Preparing Resubmission to Management Science)

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Abstract

Since the beginning of 2021, non-fungible tokens (NFTs) have gathered considerable attention. The introduction of NFTs and the high prices that many have been auctioned off for raise the question how the introduction of NFTs affect the prices of their physical counterparts. In this work, we use data from eBay to evaluate how the prices of basketball trading card collectibles are affected by the introduction of a related NFT market named "NBA Top Shot''. We find that the introduction of NFT collectibles causes the prices of physical collectibles to decline by about 5% (about 27.7 US dollars). By applying a natural language processing model, we identify the player and the year that each card refers to and we find evidence suggesting the presence of a substitution effect: The introduction of NFTs of currently-active players reduces the prices of physical cards of currently-active but not of retired players. We study each agent's (buyers and sellers) reaction to the introduction of NFTs and we find that buyers' willingness to pay drops by about 10% and sellers' reservation prices decrease by about 5%. We calculate the economic implications for marketplaces of physical collectibles, conduct various tests to validate our identification strategy, and discuss how we contribute to the literature.
Original languageEnglish
Publication statusPublished - 2021

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