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[YAK] Economics of Pricing One-of-a-kind


This is a very interesting – and complex – subject. Would you
mind defining a few of your terms for me?

You ask:

Are there any formulas that you find really work for you…

“work for you” in what way, e.g., making you a lot of money, giving
you satisfaction in your work, making you feel valued on the basis
of how others value your work?

You state:

Every time I arrive at what appears to be a fair price …

On what basis does this first price appear fair?

and then I have to double it, it seems to get way out of line.

Out of line with what? A price the market will bear? Your own
estimation of the value of your work? Some formula like:
Materials Costs + ( X hours @ Y dollars per hour) = price?

I’d be interested in hearing how you define these terms.

In the mean time, I’d like to make a couple general
observations, from an economic, rather than an artistic
perspective. You mentioned consignment, but I’ll simplify
things for right now by proposing that you, the artist have a
piece for sale and I, the consumer, am interested in purchasing
it. The concept of “fairness” is different for you than it is
for me.

For me as consumer, a fair price is one that I’m willing to pay.
I may grumble about the high cost of art but, if I fork over
the money, then I’ve obviously decided that I value the art-work
more than the amount it cost. Sure, there are lots of variables
that go into my decision but, from your perspective as artist, I
either buy or I don’t.

You, as artist, have many different factors that you must
account for in order to come to your own definition of a "fair"

To start with, ask yourself, Why do I (the consumer) buy jewelry
from you rather than make it myself? There are two possible
reasons: [1] I am incapable of making it myself; or, [2] I
could make it myself but, owing to my low skill level it is
cheaper to buy it from you, because doing it myself entails very
high opportunity costs, (the value of the time that I cannot
spend doing something else because I am trying to make a piece
of jewelry).

What this means is that you, the artist, bring value to the
project before you even start brainstorming about what you want
to make. You bring the artistic ability that enables you to
conceive of and carry out the project, (that’s number [1] above.
You also bring the skill, (skill being, more or less, the sum of
education & experience), that comes from your training and
practice (that’s number [2] above).

So, if you think only in terms of [materials cost + (time @
$X/hour)]= “fair price”, you are ripping YOURSELF off.

In order to be “fair” to you, the artist, a price must account
for: your skill & experience

  • your materials costs
  • your time
  • your opportunity costs (what else could you have done w/that time?)
  • a bunch of other stuff I can’t think of right now…

In a perfect world, your “fair price” would exactly equal that
of the consumer. But the world isn’t perfect, and when you add
in a consignment dealer, it gets more complex still.

The dealer, like the artist, has little control over the
consumer’s concept of fairness. Because of this, her tendency
will be to desire some combination of low price (to move goods
quickly) and high commission (to make as much money as
possible). It’s easy to see that her interests are likely to be
in direct conflict with yours.

So, how high should you set your prices? (And, how many pieces
should you make, knowing that they are “too expensive”?)

I think you should figure out what your “fair” price is, (taking
into account all the factors I listed above), and decide whether
your market will bear that price. (In other words, will the
piece SELL in a reasonable TIMEFRAME?) If the market you have
access to will bear that price, then charge that price; and if
the market will bear MORE than your fair price, then tack on the
extra. Why? Because you have to allow for the odd piece that
doesn’t sell at all – the piece in which you invested far too
much time and/or money ever to recover it.

Well, that’s my 2 cents worth for now.


And some pieces u will get zip dollars for and often, based on
the time to hold the material(EG., Gold), u should 'melt down’
and start over!!..

So when u have a piece that is appreciated in the market place,
the business element suggest that u ‘Price what the market will
bare!!’ . . (as is ususally done in business and follow the
market down) …considering the above. The above usually not
offering the full amount of materials/time etc.

So again, when u got a good one … fill de pockets!!!

Jim (Pratical Economics in Art!)

The silver bracelet begins life as $6 or so of raw
material. The gold bracelet starts out at about $300. (I
haven't checked spot prices lately, so humor me.)

A point Tom forgot, if you mark up your materials, say 25%,
wouldn’t you rather have 25% of $300 as opposed to $6?

I have not been able to connect to your website so far. I will
keep trying. I am a professional faceter, and have just opened
an office here in Houston. Rather than primarily cut custom
stones for others I would prefer to learn more about goldsmithing
and design and do the whole thing myself. Would like to hear from
you if you have time. Ed Katz, G.G., @Ed_Katz

A point Tom forgot, if you mark up your materials, say 25%,
wouldn’t you rather have 25% of $300 as opposed to $6?

How true, how VERY true!

Tom LaRussa
Tom’s Gems – rough and cut gemstones
Web Site
Email @Tom_LaRussa