Price Discrimination Lowers Overall Prices; But Still Pisses People Off

from the is-it-worth-it dept

Why does it cost $100 more to order a black laptop from Apple than a white one, even though they cost the company the same amount to make? Yes, the black one may look cooler; that’s part of it, but there’s more. Such a pricing mechanism actually allows Apple to distribute the cost of new product development in a more fair manner. Instead of thinking about the black laptop as costing $100 more, think of the whites ones as being sold at a discount. This expands Apple’s market, reduces the per unit cost of production, and brings in revenue to fund future R&D. But as economist Robert Frank explains in today’s New York Times, price discrimination can actually help to lower the prices for everyone — even those who pay the top dollar prices. If Apple focused exclusively on offering a premium product, it would not be able to achieve the same economies of scale, and thus the cost of that product would be a lot higher. Though there seem to be obvious benefits from price discrimination for everyone in the market, the practice really prompts anger among people who see companies as cheating their customers. Furthermore, there are benefits to uniform pricing, which Steve Jobs himself understands. Even while it may seem most economically efficient to discriminate here, that ignores the economic friction of pissed off customers, who represent a real, if hidden, cost.

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Comments on “Price Discrimination Lowers Overall Prices; But Still Pisses People Off”

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Anonymous Coward says:

Re: Re:

And its in everyone’s, including apple’s, interest in the long run to educate these ninnies about the fact that if they are willing to pay $X for an item, then it is almost statistically certain that they are also willing to pay just a little bit more–and then so why shouldnt they?

I wait a year to buy mass market paperbacks, and you mental infants can wait a few months until the black one’s price comes down to where the white one’s was back when this all started.

chrystal says:

Re: Price discrimination

Do you actually know what price discrimination is about? It’s about producers charging different retailers different prices without any reasonable justification. In the end, the retailer that gets charged the higher price is forced out of the market because the retailer that gets a rebate(lower price) can charge his buyers a lower price and no one will buy from the one that gets charged a higher price (he cannot charge a lower price to his customers and he’s customers eventually decide to go buy from the one that charges lower prices).

JerseyRich says:

I have to...

…agree with Coward on this one.

The bottom line is that consumers pay what they want to pay. If they’re smart they do therir homework, they may get a better deal. If they’re like me (impulse buyer), they get screwed.

If Apple wants to sell blackies for more than whities, so be it. If you don’t like it, don’t buy it.

Fleadiddy says:

Re: Re:

Was it Abby Linkin that said you can piss off some of the people all the time and all the people some of the time, but you can’t piss off all the people all the time?

I mean really, people that get mad at companies over how products are priced need to sit down, shut up, grow up, and get a life. Companies are in business to make money. Period. If you don’t like the product or the price, then don’t buy it. Simple.

Topher3105 (profile) says:

Trying to justify getting ripped off

Sorry, I don’t buy it. Don’t charge me $100 for a different color to offset “production costs”. That is pure bullsh*t. Apple knows that the black ones are cooler and so force the more popular model to be more expensive.

Instead, charge $50 extra for each color to make the them cost the same.

I can agree that if Apple sold only the black model, and then charged $200 more for pure profit because they knew they had a popular model, I wouldn’t complain because people will buy it regardless, but Apple makes it so obvious that price discrimination is apparent. I am surprised the black iPods are not more expensive then the white ones.

Of course, they can get away with it because it just proves that many Apple users are just dumb schmucks with more money then brains and its all about style over substance. They probably are also the same people that will wait 6 months for that “special limited edition color” of a backordered VW Jetta rather then getting one in a different color that is already on the lot. Better yet, get a car without the ego.

Anonymous Coward says:

Re: Trying to justify getting ripped off

They didnt expect for you to buy that explanation. Its given for the benefit of whomever will accept it.

But anyway–why SHOULD they cost the same? Just because it has “discrimination” in the name, does not mean a practice is bad, illegal, immoral, or unethical. I don’t think they should cost the same. I would gladly pay less (as I see it) for a tiny white thing that more resembles a tampon than a piece of sophisticated electronics. I’d pay less again if you put advertising on it. I’d pay less again if it had a black and white screen since color means nothing to me. (frankly, i’d pay MORE for a black and white device, since that means it would have to be designed around it and thus have a superior interface to the one the same designers and engineers would produce if it were color)

Different people care about different things. Who are you to slander the tastes of people that decide based on color? Who are you to slander the tastes of people in any case? Go to hell.

Anonymous Coward says:

Re: Re: Trying to justify getting ripped off

You sir, are correct.

Price discrimination is just about the only discrimination that we haven’t made illegal (although the others do tend to be all of those bad characteristics you spoke of).

Don’t get me started on the whole discrimination thing though…

garrett says:

It’s only a discount if you choose to look at it like that. If you are buying the laptop and you want black it just costs $100 more. If you want white, it’s a discount. When you complicate things by over explaining it you can start to twist how the reader views the situation. If I wanted a black one I’d just be pissed that it costs $100 bucks more and no amount of ramblings from a New York Times economists is going to make me feel better about that.

Turtle Island says:

Price Discrimination

Companies realise they can charge higher prices for different colors because they’re ‘cool’. It’s the same as buying name brands. People will beg to pay five times the actual value for, lets say, Nike shoes. Why, because it’s ‘cool’ to own them. Well, it’s the same with color. It’s not cool to own a white laptop. It always has, and always will cost more to look cool.

So, if you wanna look cool, and own a black one, pay the price for being vain and ‘Live with it!’.

Jeff (profile) says:


Oh yeah. I should explain how this benefits consumers.

When I’m sitting in a Starbucks surfing the web, and a hot chick walks into the place, when we make eye contact I can pick up my laptop, lick it, and say “Wanna try it? It’s grape flavored.”

No, I don’t recommend this as a pickup technique but I just think it would be funny as achee-double-hockeysticks to do just once.

Anonymous Coward says:


Oh by the way. When the patent lawyers get a hold of this, please offer this as advice that prior art or whatever existed, I had the idea first. Not just the idea of grape flavored laptops, but the broader idea of adding flavor to any sort of electronic product. I also hereby grant usage of this patent to anyone in the public domain, living or dead, or not yet born. (Personally, I think flavored computer hardware is something that needs to be license-free to encourage as many manufacturers as possible to adopt quickly.)

loikll says:

You’ve got to use some good judgement about how you price-discriminate. You make it look like two different products or brands. You’ve got to trick the unwary.

You sell some of your aspartame in “Equal” packets for $5, and some of it in “Nutrasweet” packets for $2.50, and you hope shoppers don’t notice both boxes list the same 1-800 number. Or, you sell a movie ticket for$8, but a movie + 10 cents worth of popcorn for $20. Or, you offer a “rebate” and count on most people being too lazy or incompetent to follow the instructions.

THAT’s price discrimination the way God intended it. You don’t sell the color #1 widget for $100 more than the identical and identically-banded color #2 widget . You’re just going to piss people off doing that, no surprises here.

Black... says:

Once you go

Its not just style here- even though the MacBook is “the new black”- the white laptops show wear and dirt faster.

Why would they make a keyboard/trackpad white in the first place?!

Because white has been Apple’s BRAND image for a long time now. They introduce black in earlier products, see the popularity of it, and decide to expand the brand image, ergo black lappy.

And its about time- I hate white, but love Apple. Now I can sleep in peace.

Anonymous Coward says:

Out of sheer curiosity, is willingness to pay more for style/something different a sign of stupidity like so many here are suggesting? Or is it really just a sign of personal taste? I mean seriously, why does it matter so much?

Yes, it is potentially sly, underhanded, and backstabbing, but in the end it is just one more product.

Oh, also the Black Laptop has a slightly larger HD standard, you you end up paying something like 80 dollars for color and 10 or 20 gigs… Still arguably not worth it, but oh well, it is still cool enough that for me, it is worth the 80 bucks.

Unpopular Guy says:

Why have two different prices?

It’s the same marketting technique that Intel used with Celeron processors and AMD with Duron processors that were essentially the same as the high end processors (Pentinum 4 and Athlon respectively) with slight modifications (the Celerons has part of the cache disable but still present and I don’t remember where the change was in the Durons). By creating a 2 tiered sales system that off the same assembly line you actually lower the cost of BOTH products. If the prices were the same for both the black and the white, you would probably pay $200 more for the book. The reason for this is that the lower cost model makes up for the lack of price in numbers and the higher cost model gives a premium product that can be charged more for. Color is a very transparent detail to base it on but it’s still a basic marketting technique. In this case it is more over done as Apple already has a two tier system with the Macbook vs Macbook Pro but my guess is that one of these books was meant to have a much later release. Enjoy the lower prices and get yourself an Apple.

Chris (user link) says:

Once you go black...

Black is cooler. It’s that simple. Want to save a few bucks? Get the Wonderbread MacBook. Need to show you’re cool? (While you’re buried in a laptop at the corner bar. Which is what I’m actually doing at the moment, so the irony is several levels deep…) The get a BlackBook.

Personally, the better color scheme is worth the extra Za.

MRing says:

Here it comes!

Socialism to save the day! Command-economy with set prices! Here, Children, choose between your gray, grey, or dirty white laptops, with a choice of Stalin Mk. X or Mk. XII processors running The People of the United States OS. 64mb RAM, as we must sacrifice to support the war efforts!

Special offer — white people only! Join the line before it reaches 23rd street and get a free game pack including Capitalist Swine Hunter 3D!!!!!!!!!

.. I swear to god, capitalism can’t work just because in the long run ignorance utterly crushes intelligence, leading invariably to socialism, lack of pesonal responsibility. I still love it though, even if its doomed. 😛

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