November 15, 2007
Desperate for a Wii
The BBC reports that there will be a shortage of the much-loved Wii console this year. These stories bloom reliably every Christmas.
The economists’ question, of course, is why on earth Nintendo doesn’t raise the price until supply equals demand? There are obvious answers - which I am not sure are correct - and then there are less obvious ones.
The curious may wish to consult two articles I wrote about the XBox for Slate. XBox Part one and, replying to a vast number of reader responses, XBox Part two.
The particularly striking (some might say “idiotic”) thing about the Nintendo Wii is that it has been scarce for twelve consecutive months. That’s right–it came out November 2006, and ever since Day 1 it’s been very difficult to find. To this day you still cannot reliably find it at any reputable online retailer (I invite you to check); and I’ve never seen one at the local Target.
So, yes while something stupid is probably going on when Microsoft doesn’t raise X-Box prices to correspond with the winter holiday demand-spike, something even more deeply stupid seems to be going on at Nintendo: they miscalculated the demand for an entire four-quarter cycle, and they have yet to be able to raise production to meet it.
‘Grats, Nintendo. If anything generates ill-will among your potential customers, surely being unable to buy your product *for an entire year* does.
Posted by: zlguocius | November 15th, 2007 at 7:36 am | Report this commentbuyers remorse is the reason for not fluctuating prices.. just look at how mad iPhone buyers got about the price cut on those phones..
Posted by: peter | November 15th, 2007 at 11:55 am | Report this commentI think raising the price would send a wrong signal to the consumers. It’s better to let them wait but eventually get this highly desired product than let them conclude that it’s too expensive and go for the alternative, which of course would mean loss of revenues in games.
Posted by: Marcel | November 16th, 2007 at 1:37 am | Report this commentThe assumption behind the conundrum seems to be that prices are only determined by supply and demand. This might be the view of most mainstream economists, but it was not the view of the classical school (Smith, Ricardo and Marx) who believed other objective factors influenced price.
Most consumers also believe that a price reflects an objective ‘value’ of some sort, and producers go to a lot of trouble to convince consumers that when they buy something it is good ‘value for money’. If people think they are being ripped off, then they won’t pay for the product.
No doubt there are times when production runs are mistakenly low, but the price set will still reflect an expectation of profits. Better to be sure of these profits than risk a consumer backlash by varying prices willy nilly.
Posted by: Joe H | November 17th, 2007 at 11:34 am | Report this commentAlso, I just remembered:
Some of this discussion is moot, because in fact retailers *do* “raise prices” until supply equals demand.
I put “raise prices” in scare-quotes, because they do something which has the same effect: they force consumers to buy bundles. Instead of getting the Wii console for $250, they are required to buy it together with many other accessories and games for, say, $700.
It sounds a lot like price-discrimination to me: buy the gargantuan bundle today for sure, for $700, or wait a while on the off-chance of scoring the stripped down console later for a mere $250.
(Most of what I know about price-discrimination I learned from Tim Harford, from his book and posts like this:
http://www.slate.com/id/2133754
.)
Posted by: zlguocius | November 26th, 2007 at 3:44 am | Report this comment