10/29/2007

Nintendo: No Price Cut for Wii for Now

If you've ever played with the Nintendo Wii, then you would understand why the management of Ninetendo has opted to not cut the price of their Wii gaming console. It is addicting and so entirely different than the alternative, that I feel that they have created their own little monopoly in the gaming market since there are no other alternatives to the unique experience of playing with the Wii out there. Because of this, they are able to keep their prices at the same level that they have had since its inception. Demand continues to soar for this product allowing Nintendo to name their price and causing the other gaming console companies to cut their prices in order to maintain market share in the gaming market.

9 comments:

Logan said...

The catch with the technology industry is that prices tend to drop naturally because of Moore's Law, in that technology is expected to double its capacity every 6 months or so, making the old technology obsolete.

So when you have a product that continues to bring in profits counter to expectations (steady or increasing versus decreasing) you need to maintain status quo regarding price for a longer period of time. Dropping the price indicates to the technology market that your product is now or will shortly become obsolete because of competing products or something that you are about to release yourself.

Hence, if Nintendo cut the price on the Wii, I believe you would see their sales drop as customers anticipate a new edition or an alternative emerging in the market.

Hailey said...

I agree with your comment about Nintendo setting its own price. Another thing I think is interesting about the Wii is that from the beginning the price of the Wii was very reasonable compared to other gaming systems. I think that they have set the price low enough that those who could not afford a cutting edge system before can now more easily afford the Wii. It was a smart move by Nintendo.

Dr. Tufte said...

Interesting.

Their ability to maintain a price has to do with elasticity (just as their initial markup did).

What we are seeing here is demand for other consoles becoming more elastic with time (because they are viewed as substitutes), while Nintendo's demand is staying inelastic because there aren't many substitutes.

Sophie said...

The Wii is such a unique product that it is no wonder that the gaming console does not have any real strict competition. This is a simple lesson of supply and demand and elasticity and inelasticity. Thus, until some other company comes out with an absolutely amazing gaming system, Nintendo should not drop the price it charges for the system.

Matthew said...

Dr. Tufte said that Nintendo's ability to maintain their price for the Wii has to do with elasticity. Because there are few direct substitutes for a video game console as interactive and differentiated as the Wii, the demand has stayed quite inelastic. I agree that this is true and that Nintendo has created their own new market for video game consoles. It will be interesting to see what Nintendo does with the Wii's prices once more direct competitors start entering the market. Will they drop their prices and try to undercut the competition? Will they find new ways to further differentiate themselves? Only time will tell.

Gavin said...

Extra Credit - Dr. Tufte
Nintendo was wise to create a product that had few substitutes. Now we will see how well Nintendo can maintain its position in the interactive market. The elasticity of their product can change rapidly if the other consoles become interactive.

William said...

Dr. Tufte,
I think that Nintendo is very smart in being able to create something that no one else has been able to. Nothing in the gaming industry seems to come even close, which as you pointed out has helped to make it inelastic and they can therefore maintain their price and not have to lower it. Another thing that I think that the Wii has going for it is that it is a lot more interactive which makes parents like it more than other games. Instead of kids sitting glued to the TV they are moving around and getting some exercise in. I personally think that it also helps to stimulate the mind more than the other type of games currently available. All in all it seems that Nintendo has created a new market that is currently in high demand.

carter said...

Dr. Tufte said that Nintendo’s demand is inelastic because it has few substitutes. This is absolutely true anyone that has played the WII knows that it is a unique experience.

sudoku daily said...

Got the Black Wii limited edition for a cheap price :)
Tried the Bowling game included with the console. It's so addictive !