This post claims that superstition may create a huge discount for used engagement/ wedding rings. But is it really superstition that is driving this huge discount? Let’s examine the factors that may affect the price of a used ring.
First, a used ring should be cheaper just because of usage (depreciation). Second, an engagement ring may be somewhat customized so the value should be lower because the ring is not equally useful (or efficient) to others. For instance, your significant other will not be happy with a ring that has another person’s name engraved on it. Finally, there is stigma/ superstition. The used ring may jinx the relationship.
But is it really superstition that is driving this huge discount? I am highly dubious. In an age that spiritual things are completely ignored and engagement/marriage/ commitment is not taken seriously (e.g. Tinder), it is highly unlikely that the ring discount is mainly driven by superstition.
I believe a more plausible explanation is signalling. Following game theory, most commitment mechanisms work well when there is a high commitment cost. Given the high upfront cost, the player is less likely to deviate (run away). In the engagement/ marriage context, less money spent on the significant other may signal less commitment and a potential deviation later. It is easier to abandon when the incurred cost is low (think of investing, it is easier to close small positions then large ones).
Also, if a person is going to be cheap on a commitment symbol, it is likely that he will be cheap on other things during the relationship. For instance, if he cannot use money on a ring then he will be miserly on other types of consumption as well. This sends a negative signal to the significant other. Hence, given the negative signals that a used ring can send, an individual is more likely to buy a new ring to not upset the significant other, creating a discount for used rings.
So does superstition play no role in the used ring market? I would say it does. Superstition is everywhere from sports to even trading. Hence, given that human irrationality is present and real, superstition will definitely affect the used ring price. However, there is a more plausible and probably economically significant reason for the discount, signalling.
- My good friend suggested that if the used engagement/wedding ring did not have lower resale price then it would not work as an effective commitment device (not a costly commitment). Plus, she suggested that if the discount on the used ring market is not large enough then the whole market would collapse because the used ring will no longer function as a commitment device. People will just either melt their rings or throw it into the river like movies. Thank you Amy for the insights!
- Also, the used ring would be discounted because the seller probably derives negative utility from the failed relationship so the individual would like to get rid of the ring as soon as possible.