Ten years is an eternity in this business. Four years ago, barely anyone bought music online the way they do now. Not to mention that inflation would erode $0.99 over that period significantly, and there's a great chance that we won't even buy media that way in ten years.
You know, you would think Senators would have some grasp over public finance, or at least employ someone who does. I'm not sure if this says worse things about him or the people who put him in office.
The reasoning behind the "sin" tax is not because its a "sin", necessarily, but that it is a tax to cover the negative externalities caused by people consuming those goods. Cigarette smoke causes people to get lung cancer, as well as a myriad of other diseases and treatment often requires state money at some point. Alcohol causes causes negative externalities when drunk drivers kill people and then the state has to pay for the police/firemen/lawyers to deal with it.
You could say that video games cause negative externalities as well, though they usually take the form of red eyes, lost sleep, and diminished social lives -- not guts spilled out on the pavement or hacked up blood.
I also seriously doubt he has any grasp of demand elasticity either.
The real world problem of equilibrium pricing
on
The 360 Is Too Cheap?
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· Score: 3, Informative
Basic economics would say that efficiency for both the consumer and producer is maximized at the point where aggregate supply equals aggregate demand. Though we have the gift of hindsight, even Microsoft probably knew that the unit was underpriced for what demand would ultimately be at launch.
However, here's the crux of pricing at equilibrium (in a real world setting). As the early adopters group gets their boxes, demand shifts left (or down) because the aggregate preferences of the group changes to a lower price point because the group of consumers itself has changed. Now the 360 is overpriced. In an ideal world, they would just lower the price. Well, you can't exactly do that in the real world because it would piss people off, chipping away at your brand. Sure you can do it, but it builds in distrust toward your company -- not the sort of thing you want to do when you're launching a 5-6+ year product line.
I would posit that Microsoft was playing the pricing game for a year down the road, not at launch. This price point puts them in a position to battle Sony effectively on multiple fronts.
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Ten years is an eternity in this business. Four years ago, barely anyone bought music online the way they do now. Not to mention that inflation would erode $0.99 over that period significantly, and there's a great chance that we won't even buy media that way in ten years.
You know, you would think Senators would have some grasp over public finance, or at least employ someone who does. I'm not sure if this says worse things about him or the people who put him in office. The reasoning behind the "sin" tax is not because its a "sin", necessarily, but that it is a tax to cover the negative externalities caused by people consuming those goods. Cigarette smoke causes people to get lung cancer, as well as a myriad of other diseases and treatment often requires state money at some point. Alcohol causes causes negative externalities when drunk drivers kill people and then the state has to pay for the police/firemen/lawyers to deal with it. You could say that video games cause negative externalities as well, though they usually take the form of red eyes, lost sleep, and diminished social lives -- not guts spilled out on the pavement or hacked up blood. I also seriously doubt he has any grasp of demand elasticity either.
Basic economics would say that efficiency for both the consumer and producer is maximized at the point where aggregate supply equals aggregate demand. Though we have the gift of hindsight, even Microsoft probably knew that the unit was underpriced for what demand would ultimately be at launch. However, here's the crux of pricing at equilibrium (in a real world setting). As the early adopters group gets their boxes, demand shifts left (or down) because the aggregate preferences of the group changes to a lower price point because the group of consumers itself has changed. Now the 360 is overpriced. In an ideal world, they would just lower the price. Well, you can't exactly do that in the real world because it would piss people off, chipping away at your brand. Sure you can do it, but it builds in distrust toward your company -- not the sort of thing you want to do when you're launching a 5-6+ year product line. I would posit that Microsoft was playing the pricing game for a year down the road, not at launch. This price point puts them in a position to battle Sony effectively on multiple fronts.