LCD Price Fixing?

bilsaysthis asks: "Bill Kearney poses a really interesting question, one which I've been puzzled by for a while too: 'What's with prices on LCD displays? On one hand a laptop can be had with UXGA resolution display for $1000. Try buying that display alone and you'll find it's also around $1000. Then there's how much they're gouging for the same resolution in an LCD television.'" Sadly enough, as much as I want one of these for my wall, the market is willing to bear these prices. How long will it be before this hardware becomes affordable?

Comments

From my days in Sales

[doorman]

I ran into this same question when I was made responsible for parts ordering for my company. I was told at the time by the manufacturer rep (Toshiba, I think) that some sort of tariff was responsible. LCD's connected to computers were not charged the tariff, LCD's separate were charged. This was the reason given to us why LCD's ordered for broken laptops costs as much as a new one.

This was 1995, and the answer comes from a sales guy, so YMMV.

Numbers Way Off

[Rashkae]

How long has it been since you examined prices on LCD displays?? A 15" Samsung SyncMaster 152B can be had for roughly $450US, and I doubt your $1000 notebook has a screen this good. (And I see various 17" models price at $600)

Re:Old answer I'm affraid

[Osty]

Prices rise as demand increases relative to supply and fall as demand decreases.

That's not how I remember my economics. You have your basic supply/demand curve, with price on the Y axis, and units on the X. As price goes up, more units can be supplied, so the supply curve has an increasing slope. Conversely, there is more demand as price drops (units become more affordable). In other words, the demand curve has a decreasing slope. In ascii art (please let this look decent ...):

p |\ d /
r | \ /
i | X
c | / \
e |/s \
+-------------
units

d = demand curve
s = supply curve

(the curves aren't very curvy in this example, but they could be depending on the supply and demand dynamics)

Price is always determined by the demand curve, with the supply curve denoting how many units can be built at a given price. If the price is high, the demand is low, and although many units can be supplied at that price, that's only theoretical -- nobody's buying, so there's no money to manufacture those units. There are always the economincally-enabled few that can afford anything at any price, and the bleeding-edge early adopters that will pay a premium for being the first on the block, but most people won't buy until the price has dropped. When the two cross, you're at the optimum price (for a non-monopolistic competitive market). After that point, more units can't be supplied because the sales won't cover costs, and before that point fewer people will buy because the price is too high. This is where you get into loss-leader (selling to the right of the optimum point, below cost, to generate more demand) and monopoly (selling to the left of the optimum point, because nobody can compete with you to keep your prices down -- there's a point where the price is high enough to allow others into the market, but so long as the monopoly keeps the price below that point, it's got the market to itself).

Now, what the original poster was suggesting (I believe -- and if not, it's what I'm suggesting) is that laptop LCDs are being sold at a price on the demand curve to the right of the optimum point (lower price), but the manufacturers can afford to do so by selling non-laptop LCDs (desktops, TVs) at a price on the demand curve to the left of the optimum point. If things are ideal, the merged graph should come out with the combined demand and supply crossing properly at the averaged price. I doubt that's the case. It's likely that the price is higher than that, but it shouldn't be by much -- if it were, then competitors would lower their prices to gain more marketshare.

And just to CMA, it's been 3-ish years since I've had an economics course, so my analysis may be off, but my graph (ugly as it is) should be correct for a baseline S/D graph.

Re:Naturally it IS price fixing

[wwwillem]

I agree, it all has to do with competition, or in this case a lack of competition.

In 1992/94 I worked for Philips in the Netherlands to build the first (and last :-) mass-scale LCD factory outside of the Far East. For the geographically less developed folks (those that think that Netherlands is the capital of Denmark :-), this means no company in the US or Europe. Please think a second of the consequences, like the US having to rely on Japanese GPS technologies.

At that time, Philips (world leader in CRTs and TVs) saw it as a threat that the possible successor of this product (LCD's) was built nowhere in the Western World. However, three years later they solved this in a differnt way by making an alliance with LG.

But, the important part is that no US manufacturer (Motorola, Intel, Zenith, RCA, etc.) has started LCD plants, and no European company (Siemens, Thompson, etc.) has done it either. That's asking for being dependent on only a very small group of companies, mainly in South Korea and Japan, that can very easy make a deal and keep prices up.

So, it's easy to say: We need competition. Someone must start that competition, even when you are the David against Goliath. Same is true with the MS domination of this world. Yes, it keeps the prices up, but you (the custumer) asked for it when you swapped your WordPerfect for Word4Windows.

So, when all that has happened, don't complain later!!!