Is plentiful supply killing the price?
Ok, let’s do some really simple economics:If something is in short supply but high demand, the price goes up.
If the same thing is in good supply and high demand, the price stays stable.
If the same thing again is in good supply but low demand, the price will drop.
I’m sure I’m over simplifying and making hundreds of economics students cringe but the basic theory is correct and explains the relationship between supply, demand and price.
But how about if we add in ‘perceived value’ which is another deciding factor on whether someone will buy a product or not.
Without going into masses of detail (and no doubt this will start a row on the forums), the perceived value can go up or down regardless of supply and demand and the actual price can affect the perceived value.
For example, if Bugatti Veyrons were £15,000, would the super-rich be buying them? Nope, because the perceived value is low. A low price like that removes the elitist, status symbol aura that makes the Veyron desirable.
Conversely, on and around launch day, the low price of the Wii, coupled with short supply and high demand, meant the perceived value of the unit was up in the £600-£700 range on EBay.
Now, given that knowledge, what does it tell you about the PlayStation 3 when our man in the Far East reports that brand new US and Japanese PlayStation 3s can be picked up from any electrical retailer for around £220 GBP?
One of the biggest stumbling blocks for many dedicated gamers, Sony’s target market, has been the price. That the PlayStation 3 is a powerful console is undoubted and, for gamers at least, it shows a lot of promise... but the fact remains that as yet the software support for the PlayStation 3 is lacking and many gamers don’t have the high definition panels needed to take maximum advantage of the PlayStation 3’s abilities.
All that adds up to a low perceived value... so supply is outstripping demand.
But when will we see a price drop? Well that’s up to Sony, but you can be sure that even if there’s no official word from Sony, stores will start doing ever-increasingly enticing bundle deals to shift units.
As I said in our PlayStation 3 Review, wait a while and see what happens... bargains are on the way and by Christmas the PlayStation 3 bundles might well be a compelling purchase.
Economics, eh? Who’d of thought it?
Apologies to any students of economics... and no ripping this off for your dissertations, ok?
