Old Lady Makes Clever Profit with Pawnshop

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Discussion Overview

The discussion revolves around a riddle involving a poor old lady who pawns a necklace and sells the pawn ticket, leading to questions about who ultimately loses or profits from the transactions. Participants explore the implications of the pawnshop's operations, the value of the necklace, and the financial outcomes for each character involved. The scope includes conceptual reasoning and mathematical reasoning related to profit and loss.

Discussion Character

  • Exploratory
  • Debate/contested
  • Mathematical reasoning

Main Points Raised

  • Some participants argue that the old lady profits by starting with a necklace worth $4 and ending up with $5, suggesting she effectively sold the necklace twice.
  • Others contend that the young man loses money because he must pay $3 to redeem the necklace after purchasing the pawn ticket for $2, leading to a total loss of $5.
  • A few participants express confusion over the mechanics of pawn shops, questioning how pawn tickets work and whether the old lady or the young man is the true loser in the scenario.
  • One participant shares a personal anecdote that humorously illustrates the complexities and potential pitfalls of pawn shop transactions, suggesting that everyone involved ultimately loses in a broader sense.
  • There is a mention of pawn shop commissions and how they affect the financial outcomes for the young man, indicating that he may incur additional costs beyond the initial transactions.
  • Some participants clarify misunderstandings about the value of the necklace and the nature of pawn shop dealings, emphasizing that the old lady's profit does not negate the young man's losses.

Areas of Agreement / Disagreement

Participants do not reach a consensus on who ultimately loses or profits from the transactions. Multiple competing views remain regarding the financial outcomes for the old lady and the young man, with some arguing for the old lady's profit and others highlighting the young man's losses.

Contextual Notes

There are unresolved assumptions about the value of the necklace, the nature of pawn shop commissions, and the financial implications of the transactions. The discussion reflects varying interpretations of the riddle and the mechanics of pawn shop operations.

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A poor old lady, with little money and plenty of time, sat quietly one day trying to devise a plan for making a little change. She finally came up with a very clever idea. Taking an old necklace, which she knew was worth only $4, she went to a pawnshop and pawned it for $3. Then, on a street corner, she started a friendly acquaintance with a young man, finally persuading him to buy the pawnticket for only $2. Now, she had $5 altogether and thus had made $1 profit. The pawnbroker wasn’t out any money since he paid only $3 for a $4 item, and the young man paid only $2 to get the $4 necklace. Who lost?
 
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The young man, since to actually get the necklace back from the pawn shop, he needs to pay 3$. Thus he lost 5$ in total and gained a necklace of 4$, so he lost 1$...
 
I thought it was the old lady who lost.
 
ƒ(x) said:
I thought it was the old lady who lost.

But the old lady started out with 4$ and ended with 5$... Or am I missing something?
 
micromass said:
But the old lady started out with 4$ and ended with 5$... Or am I missing something?

She effectively sold a $4 item twice. First for $3 and then for $2.
 
ƒ(x) said:
She effectively sold a $4 item twice. First for $3 and then for $2.
You asked who lost. The young man did.
 
Evo said:
You asked who lost. The young man did.

Wouldn't what I said mean that the old lady lost?
 
The way I see it is:

Old lady started with $4 --> ended with $5
Pawn owner started with 0$ --> -3$ + necklace --> 0$ (if young man picks up necklace)
Young man started with 0$ --> -2$ + pawn ticket --> -5$ + necklace (if young man picks up necklace)

Thus the old lady started with $4 and ended with $5, the young man started with 0$ and ended with -1$. So he lost.

The old lady did sell the necklace two times, but I don't see why that means that she lost...
 
Evo said:
You asked who lost. The young man did.

Wouldn't what I said mean that the old lady lost?
 
  • #10
ƒ(x) said:
wouldn't what i said mean that the old lady lost?
No.

You seem to be forgetting that in order to get the necklace from the pawnshop, the young man also has to pay the pawn shop. He cannot just hand in the ticket, the ticket just allows the man to buy the necklace back at a pre-arranged cost.

I think the problem here is that you don't understand how pawn shops work, that's ok. :smile:
 
Last edited:
  • #11
The young man not only lost $1 in real value, but if he redeems his pawn ticket, he has to pay the pawn shop their percentage in addition to the $3. The old lady came out a dollar ahead. The pawn shop owner came out his percentage ahead less overhead, and the young man ends up paying for both their gains.
 
  • #12
My mistake, I didn't understand how pawn tickets worth. The old lady nets $1 and the young man nets -$1
 
  • #13
ƒ(x) said:
My mistake, I didn't understand how pawn tickets worth. The old lady nets $1 and the young man nets -$1
No. The young man paid $2 for the ticket, and has to pay $3 plus a fee to redeem the necklace. He is out $1 PLUS the pawn shop commission. Not a good deal for him, but he is the only player that is on the losing end.
 
  • #14
turbo-1 said:
No. The young man paid $2 for the ticket, and has to pay $3 plus a fee to redeem the necklace. He is out $1 PLUS the pawn shop commission. Not a good deal for him, but he is the only player that is on the losing end.

There's a pawn shop commission?
 
  • #15
ƒ(x) said:
There's a pawn shop commission?

If you pawn an item, it's essentially a loan. You give them item. Pawn shop gives you cash. You pay off loan with a little bit of interest by a certain date and pick up your item.

You can also sell an item to a pawn shop. Pawn shops will buy your item at a lower rate and sell at retail price (or close to it) since they're in it to make a profit (and you're in it to get that old antique off your hands).
 
  • #16
ƒ(x) said:
There's a pawn shop commission?
Yes. Pawn shops do not loan you money on an object and then give it back when you pay the loan. They charge a commission which can be based on a fairly aggressive interest-table. You can't take a gun to a pawn shop and hock it for $50 and then recover it for $50. Pawn shops don't work that way.
 
  • #17
Never used one.
 
  • #18
I couldn't work it out either so I just did all of the transactions to see how it would go. First I borrowed my wife's necklace. It's worth about $1000, but let that go for the moment. I pawned it for $3 and sold the ticket to a young man for $2. Well actually, it was an old lady. In fact it was my old lady, the one who lost $1000 to get this thing started. When she went to the pawn shop and saw the necklace and found out she had to pay $1500 to get back her own necklace, she was none too happy. I hurried over to the pawn shop to get that $50 gun to protect myself, but as turbo-1 says, pawn shops don't work that way and I had to pay $100 for it. Now with the gun in my hand I realized that the pawn shop owner was at somewhat of a disadvantage. So I politely asked him to hand over the contents of the cash register. Perhaps I should have spoken more rudely. Having been the owner of the gun for some time before I bought it, he knew that it wasn't loaded. Without my being aware of it he pressed a button that calls the police. Since he didn't hand over any money, I had no choice but the pull the trigger but of course, nothing happened. So I threw the gun at him. This knocked him unconscious just as the police were arriving. Now the pawn shop owner has a big medical bill, my wife is out a diamond necklace and I'm in the slammer. So the answer to the riddle is everyone lost.
 
  • #19
The woman probably got forced down to $3 to begin with. Pawn guys set their mind to a price and it's hard to make them budge because they think in terms of how much they can resell it for after they acquire the item.

So when the man picks up the necklace, he's most likely going to be paying over $4. Now, he most likely will not pay that much since he only paid $2 to the lady...he simply will be out $2.

The woman lost ATLEAST $8...the pawn guy won and the woman lost.
 
  • #20
Amaz1ng said:
The woman lost ATLEAST $8.
The OP said the necklace was only worth $4.
 
  • #21
yeah that was a typo...I meant to say 4.
 
  • #22
Amaz1ng said:
yeah that was a typo...I meant to say 4.
She made $5 on a $4 necklace. She made a profit.

I weep that this thread is still going.
 
  • #23
Jimmy Snyder said:
I couldn't work it out either so I just did all of the transactions to see how it would go. First I borrowed my wife's necklace. It's worth about $1000, but let that go for the moment. I pawned it for $3 and sold the ticket to a young man for $2. Well actually, it was an old lady. In fact it was my old lady, the one who lost $1000 to get this thing started. When she went to the pawn shop and saw the necklace and found out she had to pay $1500 to get back her own necklace, she was none too happy. I hurried over to the pawn shop to get that $50 gun to protect myself, but as turbo-1 says, pawn shops don't work that way and I had to pay $100 for it. Now with the gun in my hand I realized that the pawn shop owner was at somewhat of a disadvantage. So I politely asked him to hand over the contents of the cash register. Perhaps I should have spoken more rudely. Having been the owner of the gun for some time before I bought it, he knew that it wasn't loaded. Without my being aware of it he pressed a button that calls the police. Since he didn't hand over any money, I had no choice but the pull the trigger but of course, nothing happened. So I threw the gun at him. This knocked him unconscious just as the police were arriving. Now the pawn shop owner has a big medical bill, my wife is out a diamond necklace and I'm in the slammer. So the answer to the riddle is everyone lost.
I don't know what I'd do without you Jimmy!
 
  • #24
My wife bought my own engagement ring back from the local pawnshop where it turned up six months after it went missing. (No, I did not pawn it.)
 
  • #25
Amaz1ng said:
yeah that was a typo...I meant to say 4.
But she pocketed $5.
 

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