Types of Value

I wanted to enumerate all the different ways to calculate value and price that I could think of. This will form a basis for to make sense of when to use each method. Let's imagine we're at a yard sale haggling for something as we explore these different valuation methods.

1. Production Cost - How much does it cost to actually make this? This can include labor cost/time or can just be the Bill of Materials (BoM) cost.

2. Storage Cost - What does it cost to hold inventory? For retailers, this affects pricing as they need to make a profit while covering the expense of keeping items in stock until they sell. This might be used for determining the price to sell things at during end of season clearance sales when they need to clear inventory.

3. Utility Value - For something like a tool that increases your efficiency or a service that makes you money, how much will it save or earn you over time?

4. Replacement Cost - You might have an old phone that no one would buy from you, but if you broke that phone it'd probably cost you $800 to get a new one, so you probably should put the phone case back on.

5. Amortized Cost - Dividing the cost over a planned number of years. Used in accounting to help smooth out the peaks and valleys when investing in items that might need to be replaced eventually. Also might be useful to consider maintaience/storage/usage costs so this can be factored in as well.

6. Marginal Cost - The additional cost per unit. Usually related to economies of scale: the cost to make the next unit goes down. This decreases faster than the average cost per unit. Recently I've been "two-stopping" Ubers and I think it would be weird but maybe valid to say, "Oh your Uber to Downtown Brooklyn is $26 without me and $32 with me, so can I just pay you $6?"

   

   colored pencil drawing of knitting

7. Auction Value - What's the highest amount someone would pay for it? There's plenty of game theory around different types of auctions based on the definition of "fair."

8. Sentimental Value - Exactly what it sounds like, but expressed numerically. How much would you pay for that signed baseball? How much would another collector?

9. Market Value - I think this is what people are talking about when they talk about supply and demand curves. Theoretically there's one optimal number, but there's a range of reasonable values for other strategies.

10. Investment Value - How much will this item or stock be worth in the future? For physical goods like cars, they may retain part of their resale value. One close friend got into buying luxury cars, and although the sticker price of $100,000 sounds like a lot, he was able to resell them for more than he bought them for. The luxury cars did have high maintenance and insurance costs, but I think he enjoyed them more than enough.

Are there any other methods, categories, or subcategories of value that you use? I think having these listed out can help make sense of different scenarios where you’d use different costs. For example, for a business you might be stick to market value, but when you’re offering a service to your friends you might use the production cost. Within some domains, like in accounting, there are certain expected ways and times to use certain values, but they’re not universal truths!

Blog Note:
Another listicle??? That’s crazy. Please leave feedback because I feel like this is a pretty simple framework that I think is worth exploring.