Uncommonly Rare: Consumers Value Rarity in Digital Goods More in Larger Collections

As more consumption moves to the metaverse, digital goods are becoming a substantial source of revenue for firms. Unlike their physical counterparts, digital goods have minimal supply constraints, and firms must make more deliberate decisions both on how to set the total supply of a product and how to distribute features within a product line. It is thus critical to understand how these decisions impact what consumers are willing to pay for digital goods. In an analysis of over 800,000 sales across 40 major NFT (nonfungible token) collections, we investigate how collection size and feature rarity are associated with an item’s transaction volume and average selling price. We find that, while rare items within a collection sell for more on average, this effect increases for larger collections. In addition, while NFTs in larger collections do not have lower selling prices, on average, larger collections tend to generate more sales volume.