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More on Xbox launch economics

Slate’s Xbox 360 economics lesson continues today with an update on last week’s question — if 360s are so scarce, why not raise prices? After mulling over many possibilities in this excellent article, the economist finally settles on this response:

Imagine that the typical Xbox customer is willing to pay around $325 for a basic console but is extremely price sensitive. At $300, twice as many people want the console. At $350, hardly anybody wants it. Microsoft isn’t sure exactly what the average gamer will pay and can’t change the price quickly. If they priced just a little too high, all the customers would wait for Sony’s next console.

Sounds about right. But here’s another question that a colleague of ours likes to kick around: Why don’t they release consoles in the summer? Rather than squeeze it in just before Christmas, wouldn’t it make more sense to start selling in June, ramp up production for a few months, and then have tons of supply for the Christmas rush? We’ll see what Sony decides for PS3.

Here’s today’s article, Xbox Economics, Part 2. And the earlier stories are in our Xbox roundup.

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