As everyone probably knows, SKUs were a big deal when the X-Box 360 and Playstation 3 came out. They both offered multiple platforms of entry, at different prices. I’m most familiar with the PS3, which offered a 40-, 60-, and 80 gigabyte version. There were also hardware differences between the 40gb version and others (USB ports, etc.)
In today’s ads, I saw nothing of different tiers for the PS3, with all advertisements boasting the 160gb version of the PS3 slim for $299.99. However, X-Box has stuck with this formula, offering a very anemic 4gb version for $199.99 and a beefier 60gb bundle for $299.99.
Storage is, for all intents and purposes, mind-blowingly cheap. Did price discrimination fail in this market, or is there another explanation for the absence of a tiered option for the PS3?
P.S. I realize that this isn’t the exact definition of price discrimination. I think it is close, but the scheme has a different name that escapes me at the moment…and the retail use of each system is the same.
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Friday ~ November 26th, 2010 at 9:44 pm
Adam Ozimek
It’s non-linear pricing, if you think of memory as Q. In particular, this case is similar to a two-part tariff. In order for it to be price discrimination you need the price differences to not be justified by cost, which given your point about memory being cheap I think is probably the case.
It may be that demand for memory is correlated with willingness to pay for the base system for X-Box users but not PS3 buyers, making price discrimination profitable for Microsoft bit not Sony.
Sunday ~ November 28th, 2010 at 9:33 pm
James
I know PS3s initial high price tag established it as a bit high end, it could be that anyone willing to buy a PS3 over the (still slightly cheaper) Xbox or especially in addition to the xbox is already willing to pay the high price. In other words, basically just elaborating on already the points you and comment 1 made, it could be that Sony sells the same number of PS3s regardless but loses profit on whoever buys a cheaper PS3 but is also willing to pay up for the more expensive one. I also believe the PS3s used to be much more expensive, so it could be that we’re only seeing the lowest price tier, and nobody was willing to pay for the truly expensive ones. Also, I don’t know whether the price tiers were recently eliminated, but if that’s the case then Sony might be guessing (an educated guess) that eliminating the price tiers will help for one of these reasons, but only actually testing it out on the market right now.
Monday ~ November 29th, 2010 at 10:48 pm
Ryan Vann
Probably the same reason all ATMs have braille. The stocking and production costs of offering different price discriminating models probably just isn’t worth it to Sony.