PREDICTION: USA Demand - Xbox One Has More of it Than PS4

[freedquaker]

toastboy44562 said:

I have a prediction, Xbox One has more demand than the PS4. PS4 appears to have a higher demand because of its cheaper price tag. This means the PS4 has a higher QUANTITY DEMANDED. If the Xbox One had a cheaper price tag roughly the same price as the PS4, the Xbox One would have a higher QUANTITY DEMADED than PS4 due to having a higher demand. Mirosoft is smarter by having a $100 higher price tag than the PS4 to reduce consumer surplus and maximize producer surplus (look at Ebay sales). This is just a prediction of course. I bet if you line up $400 PS4 and a $400 Xbox One next Christmas with full stock the Xbox One would outsell it easily ... in the USA/Canada/Mexico/Brazil and maybe in the UK, Australia, New Zealand (you get the point). I do believe both systems will outsell the Wii U 2 to 1 next year. Who agrees?

I am economics professor so I know everything you are trying to say, which is reasonable on its own BUT incomplete, flawed and unfounded.

 

Yes, there is a chance the DEMAND might be higher for the XB1, but it might also be due to the supply issues. It also depends on the elasticities of demand and supply on both sides as well as price discrimination opportunities (since Sony is a foreign player subject to international fluctuations in US). We may go ahead and have some reasonable ASSUMPTIONS:

a) Let's assume the demand and supply elasticities for both consoles are the same.

b) Let's assume the price discriminatory policies are non existent as of now.

c) Let's assume Sony is not affected from international fluctuations over the long run.

 

Even then there is THE SUPPLY ISSUE. This is NOT a typical PERFECT COMPETITION, so you cannot apply its rules here.

- First of all, the price is fixed, which will lead to shortages or surpluses. This has especially been more so for PS4. What does it prove? It shows that

  * The quantity demanded for PS4 at $400 is greater than the quantity demanded for XB1 at $500

- Demand A cannot simply be higher or lower than Demand B; they may switch depending on the "price" due to different slopes and elasticities. But given that we have assumed they are the same except for the "shifter", what we can deduce from the above statement is that

* The demand for PS4 is greater than the demand for XB1 - $100,

which means it may still be less, or equal, or more than XB1.

 

Then the Supply question comes into play... With fixed prices, we have shortages, which means, the supply is the limiting factor here, which prevents you from deducing any real argument. But what we can find out is

- to wait until the supply issues are ironed out and the shortages are gone away in a year or so (possibly by summer)...

- check for the sales data...

 

Given the assumptions above, If XB1 is selling...

- exactly 20% less than PS4, they have equal demand, but PS4 has more quantity demanded (due to lower price)

- less by more than 20%, then PS4 has more demand

- less by less than 20%, then XB1 has more demand, but PS4 has more quantity demanded (due to lower price)

- more than PS4, then XB1 does not only have more demand, but also more quantity demand at $100 premium

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Also Firms do not usually try to maximize their REVENUES but PROFITS. Even if MS might be collecting more revenues by charging a higher price, we know that it costs them A LOT MORE due to Kinect and ESRAM. Even the main hardware costs more to MS to manufacture though it is clearly underpowered. So actually, $500 charge for XB1 brings no extra margin to MS than What a $400 charge brings to Sony.