An eBay auction is technically a second-price, or Vickery auction. As long as you bid your value, i.e. what you're willing to pay for the item, you will either get the product for your bid or less, or not get it because someone outbid you (regardless of when that bid came in).
Sniping only wins if you bid less than the sniper's bid. If you did indeed bid less than the sniper's bid because it's worth less to you than to the sniper, you shouldn't really care that you didn't win the auction - the item wasn't worth the winning bid to you. If OTOH, you bid less than you were willing to pay for the item, that's because you didn't really understand the way the auction and proxy-bidding works. If that is indeed the case, there's a simple remedy - bid your value.
In other words - the system works.
erm... no.
Read Schumpeter or even Adam Smith.
In a world of perfect competition, the price of a good or service is simply the marginal cost plus the cost of capital for that industry (ie the fair margin). In a perfectly working economy. Which nobody has.
Hence the fact that prices are determined by willingness to pay.
See, I never buy these numbers. They're always based on "Average" costs, not the price of the inputs. Anyone who took Econ 101 knows that "Average" costs is a manufactured number; the real measure of cost is marginal costs, i.e. the actual cost of the inputs that go into making a single unit.
So it is possible to sell a unit under what the market perceives as your average cost and make money, because, by definition, if you raise the denominator (units), then your "costs" go down. Lots of people in other industries have done this (e.g. Lexus) - figure out what you think you can sell at a various price points and then price accordingly.
This is not to say that MSFT is not making a loss on its consoles, but I suspect it's significantly less than $124. Figuring that an average console owner buys 20 games over the life of the console, and MSFT gets $10/game in royalties (ignoring MSFT games and console licensing costs for now), MSFT stands to earn $200 from software over the life of the console, for a total gain of $76 over the life of the console. Given that that period could be 4-5 years, they wouldn't be selling at a loss of $124 per console - the ROI would not justify the investment (for a company that is MSFT's size, anything less than 15% ROI - maybe even higher - would be untenable).
You would think a business rag would get that, but apparently not.
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[cue operatic voice]
I get to push the pramalot...?
An eBay auction is technically a second-price, or Vickery auction. As long as you bid your value, i.e. what you're willing to pay for the item, you will either get the product for your bid or less, or not get it because someone outbid you (regardless of when that bid came in). Sniping only wins if you bid less than the sniper's bid. If you did indeed bid less than the sniper's bid because it's worth less to you than to the sniper, you shouldn't really care that you didn't win the auction - the item wasn't worth the winning bid to you. If OTOH, you bid less than you were willing to pay for the item, that's because you didn't really understand the way the auction and proxy-bidding works. If that is indeed the case, there's a simple remedy - bid your value. In other words - the system works.
erm... no. Read Schumpeter or even Adam Smith. In a world of perfect competition, the price of a good or service is simply the marginal cost plus the cost of capital for that industry (ie the fair margin). In a perfectly working economy. Which nobody has. Hence the fact that prices are determined by willingness to pay.
See, I never buy these numbers. They're always based on "Average" costs, not the price of the inputs. Anyone who took Econ 101 knows that "Average" costs is a manufactured number; the real measure of cost is marginal costs, i.e. the actual cost of the inputs that go into making a single unit.
So it is possible to sell a unit under what the market perceives as your average cost and make money, because, by definition, if you raise the denominator (units), then your "costs" go down. Lots of people in other industries have done this (e.g. Lexus) - figure out what you think you can sell at a various price points and then price accordingly.
This is not to say that MSFT is not making a loss on its consoles, but I suspect it's significantly less than $124. Figuring that an average console owner buys 20 games over the life of the console, and MSFT gets $10/game in royalties (ignoring MSFT games and console licensing costs for now), MSFT stands to earn $200 from software over the life of the console, for a total gain of $76 over the life of the console. Given that that period could be 4-5 years, they wouldn't be selling at a loss of $124 per console - the ROI would not justify the investment (for a company that is MSFT's size, anything less than 15% ROI - maybe even higher - would be untenable).
You would think a business rag would get that, but apparently not.