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XBox (Games)

Why You Can't Buy A 360 168

Posted by Zonk from the i-vote-for-a-space-conspiracy dept.
Slate Magazine is running a story about the difficulties of finding an Xbox 360 this holiday season. They explore the reasons behind the console shortage, and have some ruminations on Microsoft's motives. From the article: "So, supply shortages are a fact of life. The puzzle is somewhere else: Why don't companies raise prices when supply is short and demand is frenzied? Leaving aside oxygen and a few other essentials, there is no such thing as an absolute shortage of anything: There is only a shortage if the price is too low. At the moment, Microsoft is easily selling out the half-million or so Xbox 360 units (there's no official number) for prices starting at $300 for the basic package. Why doesn't Microsoft price them at $700 instead?"
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Why You Can't Buy A 360

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  • ebay! (Score:5, Insightful)

    by dismorphic ( 730041 ) on Friday December 16, 2005 @11:38AM (#14272298)
    no need for microsoft to raise prices, as people on ebay will surely sell you one for a mere $1200!
    • And I'm sure Microsoft would just LOVE the negative press that comes from jacking the price way up because they know they can get away with it. 300 is already pretty aggressive - if they went to 700, people would just extend their middle digits and wait a few months to buy a PS3 for a whole lot cheaper.
      • That's the ultimate fact. Superhigh prices would be bad PR, even after the prices come down. Imho, the ideal approach is to send each store a few standard 360 sets, and a few "Super Ultra Mega Bundle" sets with $1200 of crap in them. Thus, MS doesn't look bad because they never "overpriced the XBox", and they still get to get tons of cash from users. The few unbundled sets are tokens to show that XBoxes were a good price coming out.

        From what I understand, that's what retailers did anyways.

    • Re:ebay! (Score:3, Funny)

      by Wylfing ( 144940 )
      people on ebay will surely sell you one for a mere $1200!

      Or, at least, a picture of one.

    • Re:ebay! (Score:5, Insightful)

      by Dachannien ( 617929 ) on Friday December 16, 2005 @12:43PM (#14272850)
      Your comment may have gotten modded funny, but I'd have given it an insightful, instead. This phenomenon is called arbitrage [google.com], and is quite common with heavily-traded commodities. It's not surprising that the same concept would be leveraged for profit here. In this case, Microsoft doesn't raise the price in the retail market because of the PR fiasco related to jacking up the price, while actual supply and demand concerns allow the price in the resale market to be much higher.

      • Re:ebay! (Score:3, Insightful)

        by AuMatar ( 183847 )
        No, they don't raise the price because the 360 is meant to be a complimentary good. The real money is in games. If they price the machine high, fewer will be sold. THat means fewer games sold, which means less money in total. By keeping the price lower, they sell more consoles and will eventually sell more games, for more totala profit (or less total loss, if you look at how much they lost on the Xbox 1).
        • They could easily increase the price and still sell all of the consoles they are producing. Thus, they could make more money on the consoles without losing out on any game sales, since the only people buying games are the people who manage to find and buy the console. Then, when supply catches up, they lower the price so that they are still selling out on consoles. Not using that strategy is chiefly a PR move on Microsoft's part.

  • You might also want to ask why the retail stores won't price them higher. They are the middle man between MS and the consumer, they should know the price game better.

    • Re:Stores (Score:5, Informative)

      by feed_those_kitties ( 606289 ) on Friday December 16, 2005 @11:52AM (#14272414)
      Because Microsoft has dictated what the price will be. You raise your price higher than that, you can kiss any future shipments bye-bye.

      Same thing with minimum pricing. Ask why everyone sells iPods for the same price - because Apple says "you undercut our recommended pricing, you never see another iPod."

      It's a game the retailers all play, or they don't get the hot products to sell.

      • I don't know how this [joystiq.com] worked out... but I'm guessing they weren't getting many units to begin with, huh?
        • In the article he mentions using an auction to sell the initial allocations, which is effectivly what happened except the bidding was done through waiting in line the night before the sale (which makes no one any money). MS could just as easily have announce that all produciton through Christmas would be sold at auction but in 2006 the price will be set to $300/$400 or some other price. Effectivly most consumers expect consoles to be sold in a Dutch auction format (wait long enough and it will eventually
      • That would be what we like to call "price fixing". The last time I checked that is an illegal trade practice in the states.
    • And thats the real story. MS can't raise the price as they already publically announced the price and it would be real bad PR to raise the price on their part, as well if they raised the price they charge retailers many retailers would simply buy less stock, and their interest is in popularity not a few quick bucks. The retailers on the other hand would be very smart to have a floating price based upon demand... Unfortunatly for them as I understand they are all contractually obligated by MS to charge an e
  • Uh... because everyone who wants a 360 that bad already has one. Is there really such a frenzy to get one in the US? Just get one from Japanese eBay; I've heard [slashdot.org] there are plenty of leftover machines there at an affordable price.
    • "Uh... because everyone who wants a 360 that bad already has one."

      This is complete and utter bullshit. Best Buy will release more 360's before Christmas and I guarantee there will be lines similar to the launch date.

      I won my 360 at a Wal-Mart in a lottery. 46 people showed up for 4 Xboxs.
      • That must be some odd definition of "won" that I've never heard of before. You still had to pay for it, didn't you?

        This whole thing is nuts. There are plenty of new games out for the consoles that are plentiful to justify waiting until there are a decent number of games and a decent supply to buy a 360. So many in fact, that you probably don't have time to play them all between now and then. Anybody who stands in line in the cold for hours for an 8% chance of buying one (for themselves or as a christmas pre
    • So what about all the people still complaining that they can't get a 360? Oh wait, I guess they can't want one bad enough because they won't empty their bank acounts to buy a games console. Maybe people don't want to import and would rather get one locally in case there's a problem with oh, say the PSU?
  • We all know why. Billy is gambling on being able to create a monopoly by outpricing all the other competitors. You can do that if you have money to burn in the short run. Then, when you're the only gig in town, you can play with the prices to increase profits while keeping others out.

    Also, they're not losing as much per unit as all the articles say, because those pieces usually don't take into account that games and accessories are almost all gravy.
  • Now we encourage them to raise prices. Lovely. Why not just add in machine-specific DRM so each game only plays on one particular consoe? According to the article, people are going to buy the damn thing right now anway.

    I understand the economic logic behind his thinking. However, when you obviously ass-rape your most-dedicated customers (by pricing at $700 for the core bundle, as the article suggests) perhaps they won't like you much tommorrow? Just a thought.

    • Re:Jeebus (Score:2, Insightful)

      by GigsVT ( 208848 ) *
      A hard-core fan would be happier paying $700 than not getting one at all. That's the point of economics, the people that want it the most will pay the most.

      Higher prices ensure that only the hard-core fans get the console, and other people will just have to wait until the price drops to a point they are willing to pay.
      • Actually most of the die hard wanters probably can't afford the current price, let alone $700. The XBox 360 is nothing more than a drm'd bios on a compact pc. You could buy a better pc and have access to more games for $700.

    • Re:Jeebus (Score:3, Interesting)

      by ArsonSmith ( 13997 )
      Perhaps they wouldn't piss people off if they put out a price map. First run will be $999. Second run 2 weeks later will be $699 final run after Xmas will be $299 form then on. This way you can advertise it as pay what you want at the time that you want. If you want it 2 weeks earlier than everyone else you'll pay $300 more. is it worth it or should you just wait the 2 weeks or do you want to wait until after Xmas? Would all but stop the ebay scalping and would help Microsoft to not take a loss on the

  • Uhmm.. PR? (Score:4, Insightful)

    by Propagandhi ( 570791 ) on Friday December 16, 2005 @11:44AM (#14272356) Journal
    At the end of the article this guy suggests that Microsoft should have sold all of their initial stock via auction. Ignoring the catastrophic potential for fraud, he claims that such a move "wouldn't have damaged their public image because the buyer is setting the price, not Microsoft" (paraphrased). That's the most laughable conclusion I've ever read in a Slate article, which is saying something...

    Not only would everyone have been pissed that they weren't getting a fair shake at a 360 (especially real gamers, who aren't known for their endless funds), but the profits garnered from a few thousand 360's sold for ~$600 would have been miniscule (on the Microsoft scale of profits, of course). Furthermore, the ill will which certainly would have been created (contrary to author's opin, gamers would have been PISSED) could undermine the "real" launch of the console, when the normal demand could have been met.

    All in all, this guy's an idiot for thinking that because some people were willing to pay a ridiculous amount for a 360 all of the consoles should have been sold at a ridiculous price.
    • Wasn't the first run something like 50,000 units? If they all sold at 300+ over what they were planned for that'd be 15 Million in the first 2 days of launch. Not chump change by any means.

      I am 100% for the ebay market. Let the buyers set the price. If there was an ebay auction where everyone could bid on 50,000 Xboxes that would, well, be a very interesting auction.

  • Supply vs. demand (Score:5, Interesting)

    by alienw ( 585907 ) <alienw@slashdot.gmail@com> on Friday December 16, 2005 @11:46AM (#14272366)
    Because supply vs. demand only works in freshman economics class. If Microsoft priced the things at $700, nobody would buy them if they knew the PS3 would be $300. Furthermore, there are certain expectations for console pricing. Every company that tried to make a $700 console (namely, 3DO) died a slow and painful death.

    Besides, the idea behind selling consoles is not to make money. The real money is made on games. The console needs to go to the people who will buy the most games, which are also the people most eager to wait in line at Best Buy all night to grab a 360.

    • Re:Supply vs. demand (Score:3, Informative)

      by Naerbnic ( 123002 )
      You're under the impression that it would be Microsoft setting these prices. You are of course correct if $700 was the long-term set price, but as other posters have said this price would only be temporary. Since this shortage is only at launch, if the free-market price were used, the people who put the most value behind owning a 360 would own one. No one can directly determine what that price would be except those people who want to buy them. In the stead of not being able to pay more money to make sure th

      • Re:Supply vs. demand (Score:3, Insightful)

        by alienw ( 585907 )
        You are completely wrong. Demand is a function of many factors, not just price. Hype is a much bigger factor. Shortages create hype, and hype creates demand. When Microsoft ramps up their production in a month or two, there will hopefully still be enough hype to generate large demand. The PS2 launch was one of the best examples of this technique.

        If Microsoft just priced the consoles to generate minimal demand, the hype will die down and the console will get a reputation for being overpriced. Since dem
        • I'll grant you the point that shortages create hype. The demand curve can be fickle, and you have to take any thing which could affect it into account, but think a minute about what you're saying. Do you think that the news that 360s are selling on eBay for ~$700 helped or hurt the hype? Furthermore, who do you think set the $700 price tag on eBay? The demand is there, and some people are willing to pay that much for a 360.

          I don't understand the term "minimal demand". A company's goal is never to create min
    • "Besides, the idea behind selling consoles is not to make money. The real money is made on games"

      If this is the case, why not give the console to people for free?

      If people who aren't even gung-ho get one for free, they probably will buy a couple of $60 games.

      Dish Network and DirecTV figured out that the real money is to be made on programming, not equipment. That's why about 5-6 years ago they started to give everything, including installation, free to customers. All you had to do subscribe and Dish Network
      • I think this was something the Phantom was going to do. It would charge a subscription and depending on the contract, give you a discount on the console. You don't see Sony and Nintendo doing this because they don't charge for online service. In fact Sony and Nintendo don't really have an online service. MS on the other hand does have an online service. I forsee in a couple of years that you can get an Xbox for free with a annual or bi annual Xbox Live contract or if Xbox gets DVR functions, you can get a f
      • They don't do it because some people (like me) would just use it as a free DVD player. An ugly DVD player, but a free DVD player...
  • The "shortage" is artificial in order to create higher demand for the product so that people will be in a frenzy to get them one week before Christmas (3 days from today). However, Microsoft has faced the FTC enough to know that if they also raised prices during an artificial shortage, they could face penalties for gouging. Not that being accused of "gouging" for something as non-essential as an X-Box makes sense legally, but it's a risk they don't really want to deal with while trying to eliminate the comp
    • “The "shortage" is artificial in order to create higher demand for the product”

      Much as my marketing-cynical side would like to agree with you, there may be a simpler explanation for the shortage:

      Too many of them are failing their electrical QA test before they make it out of the factory.

    • I'd be more convinced it's artificial if they'd managed to come even close to filling all the pre-orders here in the UK. As it is, my late October pre-order will probably get to me in early February, and anyone trying to get one at the moment is basically stuck risking eBay...
    • I don't belive in price gouging on end user/consumer items, except perhaps food but even then it would have to be food over all and not just one or two items. Price gouging can only be done in b2b comerce where one company may have a non-monitary leverage over another company.

      1st law of economics before supply and demand, "You don't NEED anything!!"

      reason everything is a want. You want an Xbox you don't need one. You want a car. You want to go to work. You want to eat. You want to stay alive. there i
      • I think the word 'need' can be defined for a human as: "Necessary to sustain life."

        I don't just WANT to eat, I NEED to eat (in order to continue living.)

        • And what gives you the entitlement to continue living? If you read my post I did cover this. You don't need to continue living, that is still something you want to do.
          • Well, I do NEED to continue living. Otherwise, I wouldn't exist. Living is a requirement for me.

            So for there to be an 'I' requires me to live, and to eat. If something requires something else in order to exist, then that item NEEDS the other.

            I need to eat. The world may not need me to eat...but I need to eat.
            • And what exactly entitles you to exist in the first place? Sure you want to exist but there is nothing that has ever said you need to or there is a requirement for you to.

              hate to burst your bubble but there is no such thing as a need.

  • It's about the cool factor. (Score:5, Funny)

    by Supurcell ( 834022 ) on Friday December 16, 2005 @11:49AM (#14272387)
    Because a company has finally come around that doesn't care about money. A company who decides that they want to make their customers look cool by being the only one on the block to have their rare game system. If you go out and by commonly available, high-priced system, you are a rich snob. If you go out and mannage to get your hands on a semi-high-priced, nearly-nonexistant system, you are truly the coolest of the cool.

  • Over analysis (Score:3, Interesting)

    by Taulin ( 569009 ) on Friday December 16, 2005 @11:51AM (#14272399) Homepage Journal
    I heard this guy get interviewed on NPR, and he sounds like an intelligent guy, but I think he is over analysing things, and missed the point that MS just got the console out the door as fast as possible, which is why they couldn't stockpile them, as he questioned why they didn't. MS's only intention was just to hit the holiday season and get out as many as possible. The price they chose was only made in the attempt to second guess and match what the PS3 and Rev will sell for. They will most likely still be selling out when the PS3 hits the shelves, and if it is $700 on the shelf next to a $300 PS3, the sells will plumit. Start at $700 and lower $300 in the course of 3 or 4 months is unheard of, and will only scar customers. His idea of MS selling their units through eBay themselves is interesting, but that would only piss off retailers that MS relies upon.
    • His idea of MS selling their units through eBay themselves is interesting, but that would only piss off retailers that MS relies upon.

      There's no real way to prove that Microsoft isn't selling the units on eBay, unless Gamestop/EB or Best Buy tries to follow up on where each individual Xbox360 ebayer got their product. Something they aren't likely to waste time bothering with.

  • Couple facts (Score:3, Insightful)

    by the computer guy nex ( 916959 ) on Friday December 16, 2005 @11:54AM (#14272425)
    1) Microsoft has a deal with each distributer to control the exact price of each console. Best Buy cannot change the prices to fluctuate with demand. Best Buy can, although, bundle products together to help mitigate the demand.

    2) Microsoft will release another 300k or so 360's this weekend. Each Best Buy has from 30 to over 70 ready to sell this Sunday.

    3) The 360 will continue to strive not only from what it can do but also how cheaply it can do it. The Power/Price ratio is completely outstanding. You cannot spend 2grand right now on a new PC and come anywhere close to the ability of the 360 (at a measily 300$).

    PS3, on the other hand, has taken more expensive routes in developing their console. It will probably debut at aruond $500, and by that time the 360 will be easily at $250.
    • This strikes me as incorrect, I just bought a system for $2000 with dual core processors and almost a terabyte of hardrive, raid 5 and 4 gigabyte of memory... All far beyond what the 360 has I think. However I don't buy consoles so maybe I am off base?

      • "However I don't buy consoles so maybe I am off base?"

        That is correct. The 360 will have more graphical rendering power.

        The extra memory is meaningless. The 360 does not have virtual memory, the games are designed to run on what it has (and it is plenty). Same with hard drive space.

        PC games are designed to be run on 1 processor. 360 games are designed for all 3 of their 3.2ghz cores. The 360's custom video card has no equivilent currently in the PC market.
        • So what you are say is that you can't buy a $2000 dollar computer that can run 360 games? How does that make the 360 any better, what use have I for a system that just plays games and I can't do anything with. And if I remember correctly, only one of the cores is accessible. One is held in reserve and the other is tagged to run Microsoft DRM.... The equipment on this machine isn't better than a general purpose computer of $2000. If you only evaluate it within a certain set of perimeters, ie does it
      • What the gp is referring to is that your system is far more powerful, but much less specialized. You have a much higher overhead for the OS and developers are less able to leverage all the features in your system as they would be able to do in a standardized console. Also the design of your system is a balance between several competing goals (someone could build a similar system for simulations, factoring, gaming, and other functions, while the X-Box is just for gaming. While an M5 has more seating capac
        • That's an interesting analogy because you can't buy the 959 in the US either.
        • Nod,
          I understand what you mean and I agree. But his contention was that the machine is better than a $2000 dollar machine. He made no specification in which way and my reply was/is intended to see if he will correct himself or not. Frankly, I don't care. I'm bored and just cruising through comments for a while... 10-15 posts in the last few days and before that it's probably been months between each post.... I just finished up a semester at school and I haven't kicked myself in
  • and by a little prodding, namely press releases and such, Microsoft keeps them from exceeding what Microsoft wants people to pay for them. What is unusual in the game console business is how the units are priced. With many products you rarely ever see the manufacturer set the price and hold the retailers to it, there are actually laws that prevent some of this from occuring.

    So whats a retailer to do? Simple, bundle it. Many did this and it irked many consumers but many still bought into it. Microsoft's

  • That leaves us with Napoleon's explanation: Never attribute to conspiracy that which can be explained by incompetence. This view of the world is antithetical to economics, because the dismal scientists tend to be suspicious of people's motives but credit them with vast intelligence.

    This is not how the economic theory works. Producers can enter markets and produce at any price they want. However, they will quickly lose market share until their economic profit approaches zero as more firms enter at lower p

  • Last time Microsoft released an XBox in the UK, they had to drop the price by £100 after only a month or two, because no-one was buying them at £300.

    As you can imagine, this somewhat annoyed the people that bought them at the higher price.

    Microsoft would much rather have shortages at a price they plan on sticking to for at least 6-12 months than annoy their most valued game-hungry customers.

  • An idea (Score:3, Insightful)

    by bradbeattie ( 908320 ) <bradbeattie&alumni,uwaterloo,ca> on Friday December 16, 2005 @12:10PM (#14272542) Homepage Journal
    If people see the prices of consoles dropping drastically within the first few months (ie: when the demand has dropped off), they're more likely to wait for a better price. The company in question is better off guessing one constant price (or range or prices like the core and full XBox systems) that will maximize their profits. Once you bring in fluxuating prices, you have to consider that your customers will strategically wait.
  • It's absolutely true that if you want a shortage of something, price it below its market worth.

    Doesn't matter if it's gas (Carter), grain (18th c. France), or Xboxes, if the market thinks X and the price is set at X-something, there will be a shortage.

    OK, so there's a shortage. So what? Xboxes are not energy or food. There's no particular harm done, other than to MS's immediate profit, by underpricing the 360.

    Maybe MS has decided that the revenue from higher-priced XBoxes is more than offset by the cost

  • Maybe it is just where I live... (Score:3, Interesting)

    by wolf31o2 ( 778801 ) on Friday December 16, 2005 @12:28PM (#14272712)
    ...but I haven't seen any kind of shortage. You can find the 360 at pretty much any decent retailer. These things aren't exactly jumping off the shelves here (Southern USA). Everyone that I know that was planning on getting one right away has gotten one, without standing in God-awfully long lines or any of the other stuff I have heard of people going through to get one. They bought them at normal retail prices, and didn't resort to paying $5000 on Ebay. Perhaps it is just the extremes (rural and urban) that don't have any of them?
    • Do none of these "decent" retailer's sell online? You would think that if they did, people in areas where it is selling out would jump to order them instead of waiting in lines or paying excessive amounts on ebay. At the very least, you'd think that people in your area would buy them just to be able to sell it on ebay and make an extra hundred dollars or so. I actually managed to pick one up at the local best buy this morning, but to do so had to start waiting in line at 7am for a 9am opening. Even at tha
      • There are lot of retailers that sell Xboxes that don't sell online. Fred Meyer around here in the Northwest is one of them. Even if they did, sometimes online inventory is different than brick and mortar inventory, so even though Best Buy in Biloxi Mississippi may have a bunch of Xboxes around, the computers are not set up where a person in Seattle can order one online and get it shipped from Mississippi.

  • wrong business model (Score:3, Insightful)

    by rsw ( 70577 ) on Friday December 16, 2005 @12:35PM (#14272774) Homepage
    If MS were trying to make money on the console itself, the model suggested would be correct.

    That's not what's happening.

    MS makes money, theoretically, by achieving a high market penetration and then getting licensing fees for all the games that are sold. High penetration = lots of games = lots of revenue. That's why they're selling these things at a loss---the more people have them, the more money MS makes in the long run.

    In this model, there truly _is_ a shortage, because the ideal scenario is an infinite number of XBOX360s available for sale (well, there are a few problems with that---obviously you only need enough that everyone gets one, and beyond that, there is evidence to suggest that in some markets, including this one, demand actually responds inversely to supply in certain situations, hence the rumors that MS was attempting to artificially increase demand by making them hard to get).

    MS stands to make the most money by getting as many of the out as possible. Simple as that.

    Now, you could argue "but the early adopters are willing to pay more, and they make up a large enough minority that the initial supply will be gone even at $700." Sure, MS could sell the first batch for $700 and drop the price immediately to $500. Problem is, they can only get away with this trick once, if that---once everyone knows that just have to wait a couple months and the price drops a couple hundred bucks, even most of the early adopters will wait, and that kills MS's edge over Sony in getting the XBOX360 out way before the PS3.

    Just my two cents.

    -rsw
    • ### Sure, MS could sell the first batch for $700 and drop the price immediately to $500. Problem is, they can only get away with this trick once, if that---once everyone knows that just have to wait a couple months and the price drops a couple hundred bucks

      Over here in Europe MS already tried that trick with the original XBox, it started out at 480EUR if I remember correctly and then droped very quickly down to 300EUR. Didn't seem to work out that well, so MS gave all those that bought the XBox for 480EUR t

  • This guy is an economist? Not very good is he? (Score:4, Informative)

    by SmallFurryCreature ( 593017 ) on Friday December 16, 2005 @12:43PM (#14272846) Journal
    I mean this is basic economy stuff. Clearly the guy hasn't got a clue. Perhaps he should do some shopping.

    Ages ago before computers existed and when dinosaurs still roamed the earth I was a baker by proffesion. Now bakers have a odd product, it is in constant demand (in times of economic crisis be in the food industry, people need to eat) but producing it is a hassle. You can't say, Oh monday is a slow day lets do some extra bread for the rush on saturday. You can't (if you want to keep your customers) sell yesterdays surplus today.

    So most bakeries and even supermarkets run out before the end of the day (better sell no then be stuck with merchandise you got to throw away, waste eats up your already slim margin extremely fast). Just try to get bread at 6pm. Can't be done (well recently supermarkets have started with doing an extra run late in the day with bread that just needs to be baked off (sorry don't know the english terms) but many bakeries will already be closed or simply sold out)

    So why don't they raise prices this person would ask? Well einstein because people got a very clear picture in their head of what they are willing to pay for their food and they are not going to exceed that. While people need food if the bread they can buy at 6pm is to expensive they will just eat something else.

    Same with the 360. It's price is not set by supply and demand. It is set by a combination of what the people are willing to pay for it vs the cost of producing it. E-bay DOES NOT matter, same as people willing to pay 2 euro for a sandwich does not mean they are willing to pay 20 euro for a loaf, a lettuce and some meat (Tell your mom your local stay open late supermarket sells you that for about 7-8 euro and she will complain bitterly about the son she raised). Think of it like this. 1st edition Superman sells for thousands of dollars. That does not mean Marvel can sell their latest comic for 3000 dollar. Perhaps you have to have studied economy not to be able to spot this. It is not something you have to study it just is.

    MS also of course will figure in that if they sell the device at 700 and drop the price in two months they will have two effects. The people who bought it at 700 will be pissed and the people who see the new price will think, lets wait for the next price cut.

    I am like this with handhelds. I know that within a few months the price will have both come down AND it will have a bundle available. Look at the PSP, with the giga pack you get a 75 euro price cut.

    Supply and demand is overrated as a price fixer. Just my example of bread being sold out before many people arrive home from work shows that in retail supply and demand hold very little sway. An other example was a breakfast cereal (brinta) wich I believe due to a fire was out of supply for a few months a while back. Now brinta has no ready replacement (it is a porridge) but did that mean supermarkets spiked the prices on their last supplies? Of course not. Nobody would pay 10 euro's for a package even if the alternative is going without. Even those who could easily afford too.

    Some things just have a fixed price. MS realizes this. This economist apparently doesn't. 300 dollars is what the 360 will sell for. Less and they will loose to much (or worse people might think it is bad quality) more and people will just not buy it no matter how rare it is.

    Oh and a final thing about e-bay. There supply is far far far more limited. 360 on ebay is like that first edition superman. Its pricing has no place in real world economics. Only a fool or an economist would base its retail prices on what is happening on e-bay.

  • Its all marketing. (Score:2, Insightful)

    by MaWeiTao ( 908546 )
    You create a greater frenzy by making the console hard to come by.

    First, the impression is that the system must be good if every last unit is being sold. If there are systems are sitting on the shelves within the first month of release it sends the wrong message.

    Second, those that can't get their hands on a console are more likely to get even more anxious about getting their hands on one. It clouds judgement enough that one becomes available they wont think twice about buying it. That is assuming, of course
  • Put the initial shipments on ebay with a minimum bid of $300, and donate the additional profits to charity?

  • Comment removed (Score:3, Interesting)

    by account_deleted ( 4530225 ) on Friday December 16, 2005 @01:04PM (#14273044)
    Comment removed based on user account deletion
  • Comment removed based on user account deletion

    • If you keep the price low, you're not giving any more people access to it; you're just changing how you prioritize. Where a high price prioritizes rich people, a low price prioritizes idle people: those who can spare the time to wait in line...

      ...which, when you think of it, is precisely the target market.

    • But they can only supply a few people, let us imagine that 1.5 million folks want an X-Box at USD 300 (between now and Christmas), but MS will only be able to produce 0.75 million. Perhaps only 0.75 million are interested at USD 600, or USD 300 and 12 hr wait (note that the two groups are probably not either mutually inclusive or exclusive). The second problem is one of distribution, since the units were distributed in small amounts to different retailers at different times, additional resources (fuel, ti
  • Microsoft is competeing with the largest console companies - they don't want to turn a profit on the 360, yet.

    They want to get as much hype and press time as they can. Jacking up the prices will make them look like moneygrubbers trying to make a buck off the public and poor Timmy down the street will never be able to afford a $700 xBox.

    Now, Timmy has just as much chance to get one as the rich kid up the block.

    Then again, if Timmy were smart - he'd max out his credit card, get two and sell one on ebay to rec

  • From Best Buy Open Letter to XBox360 Customers (Score:4, Informative)

    by MrCopilot ( 871878 ) on Friday December 16, 2005 @03:35PM (#14274178) Homepage Journal
    TO: Open Letter to Customers
    FROM: Brian Dunn, President - Retail, North America
    RE: Launch of Xbox 360
    CC: Best Buy Store, District and Territory Employees
    DATE: December 6, 2005

    I'm writing to apologize.

    While all of us at Best Buy were thrilled to be part of the recent launch of Microsoft's Xbox 360 video game system -- one of the most anticipated events in the history of electronic gaming -- the launch did not go as we had hoped. We sold out of Xbox 360s nationwide in less than two hours, and most of our stores did an outstanding job of serving our gaming customers. I'd like to thank the majority of our employees, who provided a terrific experience for customers at the launch date. However, our promotional activities in certain cases failed to follow company guidelines. As a result, some of our valued gaming customers had an experience in our stores that was inconsistent with what you've come to expect from us, as a leader in the consumer electronics industry.

    Specifically, customers in some Best Buy stores were told that they were required to buy additional Xbox accessories or services if they wanted one of the sought-after Xbox 360 consoles, even though we advertised the Xbox 360 console alone. I want to be very clear that Best Buy does not condone pressuring customers to purchase items they may not want or that may not fit their lifestyle. In fact, these behaviors are in direct conflict with our desire to serve customers' needs better than anyone else, and our values of honesty and integrity.

    We are currently investigating all leads about promotional practices that may have violated the company's guidelines, and we will take disciplinary actions as appropriate. We have also reminded all of our stores about our policies with respect to launches of hot products. Meanwhile, on behalf of Best Buy, I'd like to offer a sincere apology to any customers who felt pressured to buy items they did not want.

    Customers who are unhappy with Xbox 360-related purchases made in November 2005 may return unwanted items for a full refund at any Best Buy store. In addition, if your Xbox 360 purchasing experience did not meet your expectations for any reason, please e-mail us at xbox360@bestbuy.com. (Employees with information pertinent to our investigation are encouraged to call our Ethics Hot Line instead.)

    Lastly, I would like to invite you back to our stores, particularly later this month, when Best Buy will receive more shipments of Xbox 360s. While supplies continue to be very limited, we are truly excited about this new gaming platform, and we'd like to deliver the best of that experience to you. We promise an in-store experience that is focused on your needs and the needs of everyone on your holiday gift list.

    Brian Dunn
    Best Buy

    Wow, Best Buy has an ethics HotLine.

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