what Intel is doing with crippling
the CPUs is called 2nd DEGREE PRICE DISCRIMINATION + 3rd
DEGREE PRICE DISCRIMINATION – it is charging different prices for
supposedly different versions of the same underneath silicon chip.
Plus, by providing such CPUs, Intel has divided consumers into two
groups with separate demand curves & charges different prices to
each group – at each group's reservation price ( the price each
from each group is willing to pay ), CAPTURING ALL THE SURPLUS from
CONSUMER.
ECONOMIES OF SCALE, MATURITY OF
LITHOGRAPHY
As everyone said here, their chip
baking processes are so mature that they have very low chips with
defects from the platter. Even with ever shrinking technologies.
If they have very similar products
in terms of architecture & features, priced differently, it
probably means that underneath the chips are identical & have
the same number of transistors. They are just branded differently,
or “crippled” to PRICE DISCRIMINATE.
COLLUSION
Majority of the CPU market is CISC
architecture ( i386, x86, etc ) share is divided between Intel + AMD
– This is OLIGOPOLY, or in case 1 vs 1 a DUOPOLY. Others' share is
almost negligible in this MASS market. I even go to say that other
markets are niche ones - RISCs ( Power, Itanium, etc ).
Oligopoly, it's features &
barriers of entry:
economies of scale ( Intel can
get resources much cheaper than AMD. Or it can push retailers.
Intel did this with DELL, had to settle this issue with AMD )
patents(Intel licensed AMD to
produce i386 compatible chips, licensing SSE to AMD, AMD cross
licensing x86-64 to Intel, etc)
name recognition( hello, anybody
knows, “intel inside”, “pentium” )
strategic actions by incumbent (
Intel can afford to sell their chips so cheap that AMD goes
bankrupt in a short time, that is Intel can wipe off AMD, for
example )
REMARK : because there are only
a few firms, each must consider how its actions will affect its
rivals and in turn how their rivals will react ( Price – P,
Quantity – Q, advertising, investing in new production capacity,
etc )
Eventually, Intel & AMD will
come to an EQUILIBRIUM, a state where, each is doing its best given
what its competitor is doing. They both want to produce when
Marginal Revenue = Marginal Cost, where each maximizes its own
profit. Plus, they can collude ( which is illegal ) they can both go
for collusion equilibrium. If that doesn't work, they go for COURNOT
equilibrium, else – COMPETITIVE(which will never happen, as the
CPU market is dominated by Intel & the CPU market is not a
perfectly competitive market).
Because Intel is dominant, we have
THE DOMINANT FIRM MODEL.
In this scenario, the dominant
firm – Intel, determines its Demand curve, as a difference
between market Demand and Supply of fringe firms. Then it maximizes
its profits where its Marginal Revenues = Marginal Costs.
LEMONS & WHAT ALL THIS MEANS TO
CONSUMERS:
Intel is even more efficient that if it
was a monopoly. Because, if there is a monopoly, there is DEADWEIGHT
LOSS to SOCIETY, where neither Intel nor Consumers can enjoy their
surplus. However, in this case, Intel captures all the surplus,
slicing & dicing the customers & setting prices that none is
left to economic inefficiency. Hence, we, as consumers, can't enjoy
cheap & powerful CPUs anymore, instead we HAVE to pay what they
offer.
Now, with less competition from AMD, we
as consumers loose out in a long run as well.
Slashdot Mirror
WHAT THIS MEANS
PRICE DISCRIMINATION
what Intel is doing with crippling the CPUs is called 2nd DEGREE PRICE DISCRIMINATION + 3rd DEGREE PRICE DISCRIMINATION – it is charging different prices for supposedly different versions of the same underneath silicon chip. Plus, by providing such CPUs, Intel has divided consumers into two groups with separate demand curves & charges different prices to each group – at each group's reservation price ( the price each from each group is willing to pay ), CAPTURING ALL THE SURPLUS from CONSUMER.
ECONOMIES OF SCALE, MATURITY OF LITHOGRAPHY
As everyone said here, their chip baking processes are so mature that they have very low chips with defects from the platter. Even with ever shrinking technologies.
If they have very similar products in terms of architecture & features, priced differently, it probably means that underneath the chips are identical & have the same number of transistors. They are just branded differently, or “crippled” to PRICE DISCRIMINATE.
COLLUSION
Majority of the CPU market is CISC architecture ( i386, x86, etc ) share is divided between Intel + AMD – This is OLIGOPOLY, or in case 1 vs 1 a DUOPOLY. Others' share is almost negligible in this MASS market. I even go to say that other markets are niche ones - RISCs ( Power, Itanium, etc ).
Oligopoly, it's features & barriers of entry:
economies of scale ( Intel can get resources much cheaper than AMD. Or it can push retailers. Intel did this with DELL, had to settle this issue with AMD )
patents(Intel licensed AMD to produce i386 compatible chips, licensing SSE to AMD, AMD cross licensing x86-64 to Intel, etc)
technology(chip production, R&D, lithography, etc)
name recognition( hello, anybody knows, “intel inside”, “pentium” )
strategic actions by incumbent ( Intel can afford to sell their chips so cheap that AMD goes bankrupt in a short time, that is Intel can wipe off AMD, for example )
REMARK : because there are only a few firms, each must consider how its actions will affect its rivals and in turn how their rivals will react ( Price – P, Quantity – Q, advertising, investing in new production capacity, etc )
Eventually, Intel & AMD will come to an EQUILIBRIUM, a state where, each is doing its best given what its competitor is doing. They both want to produce when Marginal Revenue = Marginal Cost, where each maximizes its own profit. Plus, they can collude ( which is illegal ) they can both go for collusion equilibrium. If that doesn't work, they go for COURNOT equilibrium, else – COMPETITIVE(which will never happen, as the CPU market is dominated by Intel & the CPU market is not a perfectly competitive market).
Because Intel is dominant, we have THE DOMINANT FIRM MODEL.
In this scenario, the dominant firm – Intel, determines its Demand curve, as a difference between market Demand and Supply of fringe firms. Then it maximizes its profits where its Marginal Revenues = Marginal Costs.
LEMONS & WHAT ALL THIS MEANS TO CONSUMERS:
Intel is even more efficient that if it was a monopoly. Because, if there is a monopoly, there is DEADWEIGHT LOSS to SOCIETY, where neither Intel nor Consumers can enjoy their surplus. However, in this case, Intel captures all the surplus, slicing & dicing the customers & setting prices that none is left to economic inefficiency. Hence, we, as consumers, can't enjoy cheap & powerful CPUs anymore, instead we HAVE to pay what they offer.
Now, with less competition from AMD, we as consumers loose out in a long run as well.