simonuk on 16 May 2008
Squilliam said: key economics surrounding the system. I would say the important measure would be substitution. We can see how much people consider the other systems as a complete picture. For example if the Wii price went down and the sales of the PS3 went down a lot and the sales of the Xbox360 went down a little, we would see that people consider them to be substitutes for one another, like Butter and Margarine.
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Economists generally analyze product substitution or interchageability by predicting the upward price elasticity of demand i.e. what happens when you increase the price of a product on the market. You would normally apply a 10% price increase to a product and through empirical evidence obtained by key buyers and the effects of previous price changes determine whether a consumer would when faced with the increase in price substitute to an alternative product. If you take the wii as your starting product and apply a 10% price increase do you think a reasonable number of consumers would substitute their purchase for either a 360 or PS3? If not then to an economist the two products are not substitutes may not even be in the same relevant product market.
