Auctions for luxury items are nothing new. Auction houses like Christie’s and Sotheby’s have been selling prized art, artifacts, and automobiles for decades. In recent years, a new type of luxury good has come to dominate online auctions: secondhand sneakers. New sneakers endorsed by athletes and musicians often resell for multiple times their retail price, with loyal “sneakerheads” camping outside of stores for days in anticipation of a shoe release. Each week, without fail, Nike releases a new limited-edition shoe that resells for a significant markup above retail. In 2014, sneaker resales totaled $254 million on eBay alone, with sneaker data firm StockX estimating the market’s value at over $1 billion.

These large margins seem to tell us that sneaker manufacturers are leaving an enormous amount of money on the table. If Nike and Adidas could sell sneakers at a higher price, why wouldn’t they? It appears as if secondary market for sneakers is the result of mispricing and pesky middlemen.

One possible reason Nike and Adidas underprice shoes is that they’re trading profit for guaranteed sales. Much like a company pricing their shares for an IPO, Nike and Adidas can’t know the true value of a shoe until it reaches the secondary market. By allowing middlemen to eat some of the profit, Nike and Adidas can ensure their margin on each pair of shoes, making their business more predictable for them and their retailers. A manufacturer selling thousands of pairs of shoes has less room for error than a sneaker shop flipping them one at a time.

Underpricing is also a possible hedge against oversupply. Fancy sneakers, like other status symbols, get a lot of their value from the fact they are exclusive. A nice pair of Jordan’s is a signal of wealth and taste as much as they are good basketball shoes. By selling sneakers closer to the market rate, Nike and Adidas would risk having shoes sit on shelves, which would damage their carefully crafted brand images.

Low retail pricing can also keep the avid sneakerhead on the side of the manufacturer. A large of portion of the hype around exclusive sneakers is driven by the fans of Nike and Adidas themselves rather than the clever marketing the companies are known for. By making sneakers rare but financially attainable for a broad base of consumers, the influential members of the sneakerhead community can create more demand than there would have been otherwise. By giving their most dedicated fans an opportunity to get sneakers for reasonable price, manufacturers get more eyes on their product.

Finally, an explanation that is always available is stupidity. It could be that the leadership of Nike and Adidas simply don’t know what they’re doing, but this seems highly unlikely. In addition to having some of the best product managers in the world, Nike and Adidas have so consistently undersupplied hot upcoming sneakers that it would be impossible for the current situation to have come about by chance or accident. What initially looks like a failure of classical economics is actually a story of marketing and human psychology.