I have been thinking about buying a new computer, but I ran across this article that makes me believe that if I were to buy something now, it will be obsolete in about a year and a half! IBM, Sony Corp. and Toshiba Corp. have been working in secret to produce the powerful new “Cell” processor. Cell will be ten times more powerful than conventional chips and be able to shepherd large chunks of data over broadband networks. The three corporations are currently investing billions of dollars to develop and prepare for mass production of Cell. The COO of Sony said that “current PC architecture is nearing its limits.” Toshiba and Sony are both releasing new Cell powered TV’s in 2006, and the next generation PlayStations will be using the microchip. All of the technical details will be revealed in February.
This is awesome for technology, but what about those of us who can’t afford to keep up all the time?
4 comments:
Like Daniel said- if you wait for the bigger and better that's all you will end up doing...waiting. Consumers should buy the technology that is in their price range at the time and that will sufficiently perform to what their needs are and know that the technology will be surpassed in a year or two. At least knowing that the technology industry is always changing will make the purchase not so nerve racking when you see the same laptop a year later for $600 cheaper!
Callie buy the computer that your considering. Even if you wait for the next biggest and greatest technological advances to hit the market, it won't matter because you will miss out on the next wave of advances after that. At some point you just have to realize that you will never keep up with technology at least until you make your millions with your SUU degree. Good luck!
We have learned in Marketing that companies charge a high price (skimming) when a product is originally released. I personally choose to wait until the price of the technology comes down. I would rather wait and purchase a computer that takes care of my needs without leveling my checkbook.
Callie's behavior is very common, but it also something that can quickly be shown to be irrational. Bear with me though ... just because it appears to be irrational doesn't mean that it is (it may just mean that economists haven't figured out why it's rational yet). And it made me recognize something that I might post on my blog too.
There are three things going on here. One is that gadgets depreciate quickly. A second is that they have a high price tag. The third is that their marginal utility doesn't readily diminish.
It's fairly common for people to harp on the high depreciation rate creating decision-making problems for them. This can't be the case. We buy lots of stuff with much higher depreciation rates than gadgets - like say ... french fries. But we don't have any problem with that at all.
The other differences between french fries and gadgets are magnitude and satiation.
First take magnitude. Gadgets cost a lot more than french fries. Therefore it is reasonable to worry about them more. On the other hand, as a product category, we spend a lot more on food than we do on gadgets. So, is the difference just the magnitude of the individual purchases? If it is, I think we have a paradox that could be a sign of irrationality. Thinks about it: do you worry more about a $100 purchase with a 50% per year depreciation rate, or 100 $1 purchases, with the same rate?
So that leaves satiation. A big difference between food and gadgets is the rate at which marginal utility diminishes: very quickly for food and very slowly for gadgets. You simply get full from eating ... whereas lots of people don't seem to be able to get enough gadgets. And the gadget makers make it harder for us to become satiated as they add more features and especially complementarity between their products.
So, in sum, I don't think Callie is irrational. But, I don't think that depreciation is the big issue either. I suspect it may be the sinking feeling that if she buys a new PC that she'll need a new cellphone too ... and if she gets a new cellphone she'll need a new ___________.
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