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Forums - Gaming Discussion - Raise console prices to reduce shortages?

 

Increase prices to reduce console shortages?

Yes 5 8.33%
 
No 50 83.33%
 
IDGAF 5 8.33%
 
Total:60

Hypothetically, would you be okay with Sony snd MS raising the prices of the current gen consoles, let's say by $50, if it meant a significant improvement in availability?

At the end of the day, we all know Sony and MS can move themselves up the chip priority list if they're willing to pay more money for the chips.  Throwing money at the problem won't fix it for everyone, but certainly some customers can get more chips if they'll pay more.  Sony and/or MS could choose to be such a customer.  

Since they're already losing money (or breaking even, if they're lucky) on the consoles, we can reasonably assume that they don't want to eat those additional costs.  The only other option is to pass those costs on to the consumer.

Raising prices by $50 would also reduce marginal demand for consoles, which further helps to get demand and supply in sync.  It probably wouldn't do much in the very short term, but it would definitely make more than zero difference, especially once the pent up demand is finally met.  

I don't think either will actually do this, as it would be a tough thing to justify from a PR perspective.  But, we're talking hypothetically here.  

So, would you support it?

I definitely would. 

Last edited by VAMatt - on 04 September 2021

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This won't work

Console sales (Oligopolies for that matter) don't follow supply and demand curve



IcaroRibeiro said:

This won't work

Console sales (Oligopolies for that matter) don't follow supply and demand curve

Macro Econ 101 says you're wrong.  Increasing supply is increasing supply.  Raising prices of luxury (non-essential) goods always reduces marginal demand.

It is theoretically possible that Sony and MS can't pay their way to more console components.  But, as a lifelong business person, I know that's not true in practice.  There is capacity to meet some customer orders, just not all of them, so it is an absolute certainty that money is influencing who gets the stuff that can be supplied.  



No, it just punishes those who have less money even more. You have at least a chance to get one even if it takes a while but not if you can't afford one.

But car manufacturers seem to do it now because of their reduced output. 



It would face too much backlash to raise the prices now by $50. Maybe adding a premium model with 2tb storage, a second controller in the box and a couple games for $200 more might be possible to meet demand at that price point. It's a big initial price, but you end up paying that anyway in the long run.

However Sony and MS are probably fine with the way it is atm, no shelf life is the best you can have. No point in having more expensive models sitting on shelves when you can sell everything as fast as you can manufacture them.

It sucks they can't meet demand. If MS and Sony haven't been stockpiling consoles for the upcoming season, it will likely be another 6 months before I see one in shops here :/

Now if that add would kindly piss off, I could click post reply...



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VAMatt said:

Macro Econ 101 says you're wrong.  Increasing supply is increasing supply.  Raising prices of luxury (non-essential) goods always reduces marginal demand.

It is theoretically possible that Sony and MS can't pay their way to more console components.  But, as a lifelong business person, I know that's not true in practice.  There is capacity to meet some customer orders, just not all of them, so it is an absolute certainty that money is influencing who gets the stuff that can be supplied.  

That are two points in your post:

1) Gaming hardware aren't really luxury products in the right definition of the word. Luxury products are the ones which price increase don't actually decrease demand (or at least not decrease as fast), that's because of the status that said product brings is deeply rooted in the perceived value of the brand, that's the case of fancy cars like BMW and luxury clothes brand. Which decrease demand for luxury products is generally the decrease of the income, seeing how much consoles sales increased when we had crisis and people losing their jobs due to Covid is safe to sell consoles are no longer luxury products. Of course, the definition of a luxury product will vary from region to region, but it's hard to believe consoles with a potential 300 million market can still be labeled as luxury

2) Oligopolies don't work in the same way as traditional markets: https://www.economicsonline.co.uk/Business_economics/Oligopoly.html

"The theory of oligopoly suggests that, once a price has been determined, will stick it at this price. This is largely because firms cannot pursue independent strategies. For example, if an airline raises the price of its tickets from London to New York, rivals will not follow suit and the airline will lose revenue – the demand curve for the price increase is relatively elastic. Rivals have no need to follow suit because it is to their competitive advantage to keep their prices as they are.

However, if the airline lowers its price, rivals would be forced to follow suit and drop their prices in response. Again, the airline will lose sales revenue and market share. The demand curve is relatively inelastic in this context."

I don't know exactly what was your business, but I suppose you understand not every business is the same. Every market will behave differently. If you want to see price elasticity in work for consoles I guess we can come back to PS3 and Xbone launch prices, the high launch price lead them to decrease in sales (short therm)

If their point is to reduce shortages making people stop buying, then you got a point. Increasing price will lead to reduce in hardware demand but... what's the point.. really? I don't see why a company would choose to lower their demand purposefully. The only way for either MS and Sony really increase their prices would be a veiled agreement to both, and then this would only cause an increase in demand for other consoles (Switch) or even PCs, both companies would only lose market share



The idea is to increase supply by being able to buy more components (away from others) at a higher price, while diminishing demand only a little to reach a balance where more consoles are sold in the short term.

While that might be nice for those willing to pay a bit extra to get a console a bit sooner, there's nothing in it for MS and Sony. They don't make a profit on console sales, those waiting will buy anyway, and are still buying cross gen titles on what they currently have. Higher price points only reduce the demand of new potential buyers, those that would increase the market share.



Lol yea lets not go that route... It would set a pretty bad precedent for the future of gaming. A $50 increase won't affect anything but making consumers pay more for a product that should cost $50 less. It's literally just giving the companies more money when they already have a ton of money...



             

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SvennoJ said:

The idea is to increase supply by being able to buy more components (away from others) at a higher price, while diminishing demand only a little to reach a balance where more consoles are sold in the short term.

While that might be nice for those willing to pay a bit extra to get a console a bit sooner, there's nothing in it for MS and Sony. They don't make a profit on console sales, those waiting will buy anyway, and are still buying cross gen titles on what they currently have. Higher price points only reduce the demand of new potential buyers, those that would increase the market share.

If it's not a profit, then it would be less of a loss. 

Personally, I think it makes sense as long as prices are not permanently increased.  If they did that, people should be able to reserve / lock-in an order at the current price by a certain date prior to the price increase taking effect.



I would think they could easily raise the prices $50 maybe even a $100 and still sell out at the moment. They can blame inflation, chip shortages, or whatever else they want to blame to justify the price increase. While I do think they could do it, I don't think its a good look for them and might give them more money in the short term but hurt them in the long term image wise. Either way I have my ps5 and don't plan on getting an X for a few years years.