Will Nintendo wii sales fall with the 360 pricecut?

[famousringo]

theworldendswithme said:

Let's apply some economic analysis.  The recent price cut of about 20% of the Xbox 360's price has caused 100% increases in sales.  That means that the Xbox has a fairly high degree of elasticity.  Let's think of things with low elasticity, stuff that sells well even if the price goes way up:  milk, gasoline, life-saving medicine.  These are the kind of things that have consistent demand because they are staples of life.  Something with very high elasticity means people are buying it because "it's so cheap I might as well."  Not exactly a winning strategy, especially when a company takes a loss on every machine sold.

Now let's think about the Wii's elasticity.  If Nintendo slashed the price of the Wii it wouldn't affect sales because the demand is already higher than the supply.  Yet we have seen Wii sales jump 200% in weeks where Nintedo fixed supply issues to coincide with the release of high profile games.  That means people aren't buying or refraining from buying Wiis because of pricing.

So what can we deduce from the comparison the two elasticities?

That the current jump in Xbox 360 sales will not cut into the Wii market at all, and the increases in Xbox 360 sales are a blip that will level off within 3 months after the holiday season, most likely to levels lower that how they were selling last week.

 

Ooooo, cleverness.

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