Pricing and value is something I happen to know a bit about... I am an appraiser by trade. While Real estate is the particular investment I spend my time evaluating, the principals of valuation are quite the same regardless of what is being examined.
Insofar as pricing is concerned, there are three methods of determining what something is worth, what it's value is. Weather or not whoever possesses the item asks for its actual value when offering for sale is another matter.
Principal 1: a knife is overpriced when the price exceeds the value.
This may seem like a no brainer, but consider what is really said. Value is an abstract, a concept. That concept is most typically tied in some abstract way to a statistically likely price, given a certain set of conditions.
Thus, one could define value as the most probable price an item would sell for if it were allowed adequate exposure to compete on the open market against other items of its like.
You will note in the very barebones definition of value above that adequate exposure and competition are key elements. Certainly, with a captive audience or a monopoly on an essential, value and price are irrelevent, as there is a bottleneck at supply, and any demand whatsoever must pay the price required. However, in the world of supply and demand, a certain level of exposure and a certain amount of time are required before an item can be expected to sell.
Principal 2: Value is an abstract that depends on conditions of exposure, supply, and effective demand.
Effective demand, BTW, is that segment of the population with both the desire to purchase an item, and the means to make that purchase a reality.
Thus, as price increases, effective demand decreases. In order to compensate for this, a greater degree of exposure, either through more advertising, or through longer marketing times, must be utilized.
And so, a crossection of sales could be sampled, where some knife sellers wanted top dollar for their product and either spent a fortune on advertising, or let their product be for sale for a very long time. Others wanted to sell a lot of knives quickly, and so their prices were low enough that neither advertising nor extended marketing times were needed. Both could very well be selling the same knives!
However, the majority of sales would be somewhere in the middle. Statistically, you're looking at a classic bell curve. In reality, we rarely get to see a statistically significant amount of data, and so we must make certain reasonable judgements about wat exactly lies in the midrange.
And thus, value is, by those who know what they are peaking about, quite often expressed as a range "between x and y dollars". or as a limit, "not more than x" or perhapse "not more than y".
One can tell if an item is overpriced not by weather or not it ever sells, but by weather or not it is taking too long for it to sell.
For example, let's say you're looking at a reseller who carries some work by custom smiths. You see a beautiful knife made by your favorite mastersmith. However, being a shrewd collector, you don't want to pay more than it's worth. Knowing the smith, the reseller, and the general conditions of the market would do you a great deal of good.
In the above example, let's say that the smith has a waiting list measured in years. Like most mastersmiths with that situation, he makes the occaisonal peice not based on commission, but because an idea struck his fancy, or whatnot.
However, even such conjecture peices tend to sell before they're finished.
The reseller in this example consistantly charges 10% more than the smith originally sold the knife for. They can get away with this because supply for this particular smith's work is short as compared to demand. However, this smith already charges a heafty premium for his goods, so buying from the reseller is getting very expensive. Many byers consider looking elsewhere, helping reduce demand a bit.
Thus, the reseller typically has something from this smoith for around two months before it sells. Sometimes a sale happens in less than a month, sometimes it takes three, but most typically, around two months.
In this situation, it would be quite obvious that the reseller is asking too darned much, if they have had a given knife for longer than say, four months. The price has exceeded the value by enough to require an extended marketing time.
Certainly, it is possible to speak to cost of manufacture. This is more of a factor in the mass produced market than it is in custom smithing. However, it bears mentioning.
In this instance, a knife is worth what it costs to produce it. Quite a useful approach (called, creatively enough, the cost approach) for wholesalers, factories, and such, but less so for us end level consumers. Still, the price and more importantly, the supply (which has a pretty large impact on price) are controlled by supply chains that begin and end with economists measuring cost per unit vs distribution vs absorption (how many units will sell in a give period of time). These economists are very, very good at what they do, and they, more than most people would believe are the rest of the body behind the so-called "invisible hand".
I would also like to add that although our knives are very different, inside and out, I have never made any bones about the fact that I believe Ed's knives to be a good investment for the collector and I would be happy to aquire one myself, if I found a good deal (I am, after all, living on knifemaker wages
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