Saturday, November 18, 2006

A Kid's Eye View of Capitalism

The Playstation III was released at 12:01 am yesterday morning. According to our local paper, people started waiting in line at Wal-Mart on Sunday night. I know by Tuesday there was a long line of very cold people in tents outside of Best Buy. We've been in this situation before, when Klaus spent 12 hours in line waiting for the Xbox 360 to be released last year, so I can't be too critical of the many college students waiting days for the PS3. Particularly since most of the people I saw interviewed in line said they were waiting for one to resell. Last year, the $400 and $600 Xboxes were re-selling for thousands of dollars.

Wolfie and Xavier thought waiting days was excessive, particularly for a game console they don't think is going to live up to the hype. Then we checked how much these boxes were selling for on eBay. Many sold in the $2,000-2,500 range, but some were ending between the $4-5,000. One auction ended with a "buy it now" price of $9,000!

It makes an excellent lesson in supply and demand. Our boys were astonished someone would pay that much extra just to have it now without waiting in line personally. But after DH figured that the seller who made $5300 on his console earned about $100/hour (assuming he waited 48 hours), the boys were suitably impressed. An excellent real-life example of the concepts of "value-added" and entrepreneurship.

Another lesson comes at Sony's expense--literally. These premiums paid to entrepreneurs aren't going back to the gaming giant. Also, Sony is apparently taking a loss of several hundred dollars on every console it sells. Traditionally, consoles are sold at a loss by all game makers, not just Sony, according to CNet. Companies make up the loss by selling games at a premium. Now we know why the new games are $60 a pop!

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