Wednesday, December 14, 2011

12/13: Six hundred bucks? Say it ain't so, Mario?

Driving home from work today, I stopped by the old cider mill, which also sells wreathes, grave covers, and gaming console rumors. (But only at Christmastime.) The talk was of the Wii U.

"What I heard," one old-timer said, "was that this here white doohickey device will cost $600."

Says who I interjected?

"Australia. The price is Australian dollars is $598."

"Oh. I see. Australia hasn't been wrong with its pricing before. And how does Australian dollars --"

"They're the same as US dolalrs."

"Rats. So $600."

"So what?" a young man said. "They dropped the 3DS price within six months. Just wait a bit and the price will come down. It's not like they'll have any good games for the first year anyway."

I intejected at this point, pointing out that I had email Tim Harford a few times regarding his article about console pricing. He said that the rational economic thing to do would be to have a variable pricing system. The die-ahrd gotta-have-its will happily pay the $600. When people stop buying at $600, drop it to $500 and collect more sales. And so on.

"They DO do that," the young man pointed out. "Wasn't the Xbox 360, like, $300?"

"Yes, but there's a presumption of value. If you charge $300, it's worth $300. If you charge $600, it's worth $600, even if the same $4250 of parts went into each. This could be Nintendo's way of getting the most money from every consumer."

"I thought only Mario did that, try to collect every last gold coin in existence."

I raised my eyebrow. "Why do you think Mario learned it from?"