PS3 Prices to be Cut
Sony, the Japanese electronic giant has just announced that they will cut Playstation 3 prices by $100. It currently costs about $700, but with the cut will bring it closer to what a PS2 normally is sold for. A reason for the cut is to be able to better compete with such gaming systems as the Nintendo Wii and the X box 360, both released around the holiday season. I feel this is a smart move by the Sony company. This price cut will attract more buyers to the PS3 and possibly away from the other gaming systems out there. The PS3 is a product that I feel could be deemed elastic. A reason for this is because that it is not a necessity and instead of buying a PS3, you can easily choose another popular gaming system. Also, when something is elastic, the greater number of substitutes will result in the greater amount of elasticity. Another important aspect that can be discussed in this article is perfect competition. For example, there are a large amount of buyers and sellers in the gaming market with a homogenous prodect (gaming console). These gaming companies have the option of entering or exiting at anytime they like. Hopefully, these price cuts will keep SONY from exiting the market anytime soon.
11 comments:
I agree. I think it is neccessary for Sony to cut the price of their product. They are probably not selling as much as the Wii and X-Box 360 and this makes it necessary for them to cut prices. I think it would also help them to produce more so that they can sell it at a lower price. They are already elastic and they need to start acting like they are. Their prices are higher than the price of a substitute so they are not selling as much. It makes sense.
I agree with the author about most of the points in this article, but i beleive Sony needs to cut the price of the PS3 a little more than $100, since Xbox 360 and Nintendo Wii are both selling for around $300-$400.
I also agree with the author. Sony definitely needs to cut prices on their new gaming system. Having considered purchasing a new Sony PS3, if it were at a cheaper price, and having played the rival, Nintendo Wii, I would be inclined at purchasing the Wii over the PS3. With the fairly homogenous product, the extra price isn't equal to the differences between the systems.
Yes, I agree also that Sony needs to cut their prices. At first, I think that Sony was a little arrogant and figured that people would be willing to plop down $700 even though rival systems were hovering around $300-400. They would have been able to pull this off had their product been exponentially better than its competitors, but the fact is, they are closer to being substitutes when being compared to their competitors.
A price cut will help Sony in the sale of the PS3 which will probably rise some, but there is a big price difference between the PS3 and other gaming systems. Since there is such a big gap between the systems a price drop will not sway the market that much because a customer who is set on and wants to buy a PS3 will buy one regardless of the price...
Obviously, as everyone has said, with an elastic demand curve, for Sony to increase revenue, a price reduction in the PS3 is inevitable. I also agree the product is somewhat homogeneous as other gaming systems act as substitutes. I do however, question Luke’s perfect competition theory. One requirement of perfect competition is that a large number of sellers exist in the market… how many companies produce these battling gaming systems, three? That is far from perfect competition. Microsoft, Nintendo, and Sony are anything but price takers when it comes to their video game systems. Obviously they aren’t or Sony’s would not have made any sales at their outrageous price. Unfortunately, the industry’s competition is far from perfect.
it is not a homogeneous product because each gaming system offers something different. Gaming systems with less features cost less money, like the Nintendo Wii. You cannot compare a system like the Wii with a PS3 or even an Xbox 360. The attraction of the Wii is the cost, while the attraction of the PS3 and the Xbox 360 are its high quality features.
I agree, though, that the cut in price is a good move for Sony to compete with Microsoft.
Although the price cut of the PS3 may help the sony company in the short run in the long run I do not think that this price drop will have any effect on the gaming market for two reasons. The price of games and accessories is the first reason because the prices are outragous, even if you can afford the system you will go broke buying the games. The second is the amount of games and the quality that are in the market right now, there is a shortage of games and many of the ones that are out are not outstanding as seemingly promised.
A price cut would be a wise decision for Sony. A reason for such a high price is because each PS3 costs so much to make. To lower the price of the system would mean that the purchases of the system would have to skyrocket, which is a gamble that Sony may or may not want to take. It is true that the Wii and the PS3 came out around the same time, but the 360 came out one year ago, and has had time to reduce the cost for the console.
Oh how I love big business. If I can get people to stand in line for days to receive one of the few PS3's being sold in the U.S. to then make them buy it for 1,000 dollars. Why wouldn't I? People are still buying the PS3 at 700 dollars. So why not keep charging it? There is still demand for the product. As the demand starts lowering the price will too. They are playing the market very well. As long as it is fairly new people will buy it for a large price. Same with automobiles. Newer model larger price tag. You may see a 2006 car on a lot that was 5000 dollars last year that has been cut down to 3000 dollars. If you have one person who will buy at 5000 then why not have them buy it? If the opportunity cost of keeping it on the lot is more then selling it for 5000 bring the price down to 3000.
I think it's a good idea to lower the price. The lower the price the more people will want to buy the product. I know personally id like to purchase a PS3 but it costs so much I cant afford it. When the price falls I'll go buy one. I've always been a Play Station guy, but if the prices are so high whats going to stop me from buying an X-Box?
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