Esoteric Dissertations from a One-Track Mind

July 2, 2007

iPhone Speculation

Filed under: capitalism, random — codesmithy @ 9:00 am

I was amused at the story of a woman who tried to purchase all the iPhones at an AT&T Store.  I am not surprised that she tried it, since the game is usually not to open the package, and just return it to the store if it doesn’t sell.

However, there were multiple factors working against her.  First, there were planned to be 3 million units at launch.  Meaning, demand was very unlikely to exceed supply.  Secondly, the iPhone was released in the middle of summer.  Although, there are people who are willing to pay a lot of money for the device, the time that speculation usually goes through the roof is for Christmas.  It is unlikely, even if she did buy out the entire store, that she would have made back the $800 she paid to the first guy in line.  The thing that makes the speculation market go through the roof is the proximity to Christmas.  If it is “the” gift to give for that particular year, then the price goes up as people desperately try to acquire one before the Christmas deadline, usually for some one else.  It is the selflessness that is a significant part of the pay any price mentality, which is really the sweet-spot of speculation.  The iPhone does not exist in that demographic as of yet.  She would have had to sold them, literally on the day of purchase.

Although, from her perspective, she had nothing to lose.  Maybe those factors were working against her but, if she had the capital, it would not have hurt to try.  Obviously, the limit of one per customer effectively killed her plan.

Which is the problem with speculation, since the item has a value that doesn’t depreciate quickly, you drive the price up the demand curve by artificially manipulating the demand and supply, gaming the system.  The other alternative is to make the customer pay a restocking fee upon return, so simply returning them to the store is not a zero loss proposition for the speculator.  However, that scheme punishes some legitimate cases also, so it might be a case of the cure being worse than the disease.  That said, it is nice to see that chicanery of this kind punished rather than rewarded, even if it is as trivial of a matter as a gadget.


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