ymeaga1n on 08 December 2007
| Avinash_Tyagi said: The person who wrote this article doesn't really understand Economics and Buisness, now granted Nintendo doesn't want to have excess supply, however they do not want to have a shortage of this level, and how do we know, it comes down to the fact that the console market operates in a state of monopolistic competition, in which product differentation is key to profits, and where a firm's ideal level of production is where Marginal cost equals Marginal revenue (marginal revenue being steeper than the normal demand curve), We know that Wii's production is no where near that level since at that point it would only be able to sell more product by lowering its price, the fact that there is large unfulfilled demand, even at higher prices, as evidenced by Ebay sales shows that Nintendo would not have to lower prices in order to sell more, indicating that production is not at the optimum level for Nintendo and that it is losing potential profits, something not good for Nintendo, only someone not versed in economic theory would consider this a good thing for Nintendo |
We have an economist amongst the gamers! lol Everything you said is true. But it depends on how much of a shortage it is. If Nintendo is producing near its equilibrium quantity, it's still is generating a lot of revenue. Hype can be advantageous. Economics is pretty clear-cut, doesn't really factor in something like hype. What they should do is increase the price of the Wii to bring the quantity demanded down to what they're supplying, then they would be cruising :).
BTW, CNNmoney reported that they will not be increasing production again. http://money.cnn.com/2007/11/27/technology/bc.apfn.us.holidaysales.ap/index.htm?postversion=2007112719
