For the last four years, the Green Bag ("An Entertaining Journal of Law") has given its subscribers a bobblehead doll representing a Justice of the United States Supreme Court, starting with former Chief Justice Rehnquist, followed by Justices Stevens, O'Connor, and Scalia, in descending order of seniority. A subscription to the Green Bag goes for $35, an amazing bargain for a publication of such stellar quality. But the price the bobblehead dolls fetch on eBay makes the subscription price appear even more of a sweetheart deal. Rehnquist dolls have recently gone for upwards of $2000! In a recent letter to the Bag, Ira Brad Matetsky suggests that this discrepancy serves to discredit the "efficient market hypothesis" that the Supreme Court relied on in Basic, Inc. v. Levinson. Now, I certainly take issue with Basic myself, and with its use of the efficient market hypothesis. But I still think Matetsky gets it wrong. I could try to explain why myself. But it's probably wiser to let a real economist do the explaining in my stead. Luckily, Alex Tabarrok of Marginal Revolution and Tim Harford of Slate recently did just that. Harford asked, why did Microsoft kept the price of the Xbox at $300 when it was selling on eBay for much more, appearing to "leave money on the table"? The answer, in a nutshell, is that the demand curve has a very long tail. Only a very small number of people are willing to pay the exceptionally high price. Or as Tabarrok puts it, "Raising prices [of a Green Bag subscription] even a little would reduce the quantity demanded a lot and would generate only marginally more revenue." Link via How Appealing.
UPDATE: Mr. Matetsky corrects my characterization of his letter in the comments. But I don't think it changes the answer all that much. The people willing to pay a lot of money for a bobblehead arguably do represent an inefficiency, just a vanishingly small one.
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