Do you guys realize..the 5870 is under-priced? (free market economics)

Shark974

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Here's what I mean...in true free market, there is NEVER a shortage of any good! Why? Because the price simply raises until it meets demand.

Whenever you see a shortage of a product, such as 5870, you should realize shortages occur when the price is held artificially low. Classic economics. And a good point for our health care debate I might add (you can bet when health care is free, shortages are inevitable, just like the ones in Canada and UK right now, :p, but I dont want this to be political so lets ignore that).

So what am I getting at? Newegg should have the 5870's priced at $480, $580, or whatever it takes to keep them not sold out, and make a nice profit for themselves. People would whine, because we're conditioned to be anti-capatalist, but there's nothing wrong with it, nobody NEEDS a video card. And this way, they wouldn't go out of stock every ten seconds. I'd argue it would be better to have $480 5870's in stock for each of us to consider buying than the situation now, where we cant get them at all.

And if newegg raised the price, well ATI is missing out on free profit, so ATI should be the ultimate one raising prices.

Sure, this would only last a few weeks, until supply caught up with demand, then theyd be back to whatever price ATI set as the best price right now. Which I personally suspect would be more like $450 all the way until Nvidia gets competition out, but then again I could be all wrong about that, and ATI may well make more by selling more volume at $380.

I'm always reminded of this whenever new video cards come out and "sell out".

I'd even ask whats the difference between this and Apple selling iPod touch that probably costs $100 to make for $230? Or Nvidia introducing the GTX280 at $600 last gen, only to be forced to slash prices rapidly when 48XX came out? All are cases of demand leading to profit.

Even take it to game consoles..every Wii that sold for $400 on ebay for like the first two years of it's life, was money Nintendo missed out on. If it's okay for thousands of people to resell Wii's on ebay for profit, why not Nintendo?
 
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faugusztin

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It is already going on in my country. Asus HD5870 - 369€. Gigabyte HD5870 - 359€. Sapphire HD5870 - 339€.
 

Tamlin_WSGF

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Do you guys realize..the 5870 is under-priced? (free market economics)

I'm not complaining. :D I hope that Nvidia follows the same with GT300 and underprice that as well.
 

Breath_of_the_Dying

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It only works if you have a monopoly on the products (like Apple who can charge whatever the hell they want and people still buy their overpriced crap). When there's competition, you have to stay competitive all the time. This is multi-dimensional too, it applies to consumer loyalty. Many people would buy all their parts from one place (such as newegg), and over time they trust the overall pricing of the store even if its not the "best" deal for some items.

Now since ATI is the first to market with the new generation, they can start off with a high MSRP and make more money, but again they're looking for brand loyalty. Their biggest concern is market penetration and making sure the product does sell out to keep the hype going. Who knows, maybe the current MSRP is high for them, and they can drop it $100 or more by the time nVidia answers with the 300 seires.
 

Breath_of_the_Dying

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Actually, on second thought, I'm pretty sure the 5000 series will drop by $100 by the time nVidia rolls out with their card, if only I can wait that long....
 

Tbird87

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People are use to good price per performance in almost every tier now days. I'm not much into economics, but I think comparing it to a Wii or Ipod would be inaccurate on the profit for ATI. I bet a good percent of people looking to buy a 5870 at launch are owners of a GTX260, 280, 4870 that were deciding on the 5870 or just adding a 2nd card for SLI/Crossfire. If they priced it higher than what it seems worth those purchases would never happen. For anyone deciding on the 5870 or waiting for nvidia's offering. If they decide to wait and Nvidia comes out with aggressive prices, the people who waited because of extreme prices, may like Nvidia's offerings and ATI just lost out of a sale they could have made when it had no competition.

If you want an itouch or wii, you HAVE to buy it to have the same experience. It's not like there's a cheap alternative of those products that will act very similar. People bought the wii because it was cheap. Then their friends/family would come over and play wii bowling and be like OMFG im buying one right now. Nintendo also makes a killing on the games. All the top selling games are published/made by them. They also make a profit per each console sold because of cheap price it takes to make. Also with itouch you're paying for the name, quality, interface software.

ATI is being smart and is gonna play the same way they did with the 4800 series which seemed to be successful compared to previous generations. Nvidia owned the market with the 8800 series when the GTX280 and 260 released. ATI was finally able to compete last generation and shouldn't get comfortable just yet(or ever) when the aggressive pricing is working good for them.
 

kledar586

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I thought company don't make much if any profit on the game consoles themselves.
 

Erasmus354

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Sure based on shortsighted economics theory it is underpriced. However, ATi/AMD is doing the right thing in keeping the price low. Supply will catch up shortly. The reason why they are doing the right thing is mindshare. People would be much more pissed at AMD if they were price gouging at launch then they will be with the cards being sold out. The high end cards are not the profit centers for this business. The high end cards are marketing tools. You get the enthusiast community happy with their expensive high end card and that will help trickle down to the mid/low end where the real money is. If the enthusiasts are happy with their 5870 they will recommend the 5770/5670 to people. The battle here is to gain marketshare, not to get tons of profit on the 5870.
 

trinibwoy

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The whole concept of MSRP kills any free market theory. There's also no mechanism for consumers to bid up the price. Maybe if Newegg ran an auction that would work :)
 

vjcsmoke

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LOL, if they were auctioning off individual cards, the prices would probably go in the 450s and up.
I understand the argument that if these cards are selling out at $379, then ATI could have charged more for them.
But whats the consequences of NOT selling out at $499 and also getting prospective customers pissed off at you for the pricepoint?

I think that the price ATI settled on was decent.
The 5870 IS a better card than the 285GTX so pricing it over $300 makes sense.
It's NOT a faster card than a 295GTX so pricing it under that card's $500 price tag also makes sense. (Although when running games via DX11 it might well turn out to be faster according to some benches!)

And in a week the 5850 is going to pull in even more customers at its very attractive $259-$279 price point.
Get equal or better than 285GTX for LESS money. Who wouldn't want that?
That's going to force Nvidia to drop the prices on 285GTX to compete.
The consumer wins. Meanwhile ATI establishes larger marketshare. In that sense they also win.
 
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Hypernova

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The whole concept of MSRP kills any free market theory. There's also no mechanism for consumers to bid up the price. Maybe if Newegg ran an auction that would work :)

Or if ATI suddenly sets up an ebay store and sell exclusively from there.
 

MrLonghair

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This is the first new enthusiast card launch since the economy started getting better, I expected it to sell out no matter the number of cards ready for launch (200k?). Being what it is (just look a generation or two back) it's underpriced, AMD could have made more by asking more, but they're doing this with a shit-eating grin that ticks Nv bigwigs off royally, and the moment they lay down their cards, they'll come out with pricecuts, and still make a tasty profit on every sale.

So Yes/No :)
 
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What is this shit, baby's first economics class?

Whenever you see a shortage of a product, such as 5870, you should realize shortages occur when the price is held artificially low. Classic economics. And a good point for our health care debate I might add (you can bet when health care is free, shortages are inevitable, just like the ones in Canada and UK right now, :p, but I dont want this to be political so lets ignore that).

Since you went there in the OP, I'll go there... How can anyone view the "problem" of having to wait longer for health services because more people have access as anything but good? I'd gladly wait 2-3 hours longer for a doctors visit if it meant that millions of people wouldn't be dieing needlessly just because they are uninsured. I'm always amazed that people use that line of reasoning in health care debates.

So what am I getting at? Newegg should have the 5870's priced at $480, $580, or whatever it takes to keep them not sold out, and make a nice profit for themselves. People would whine, because we're conditioned to be anti-capatalist, but there's nothing wrong with it, nobody NEEDS a video card. And this way, they wouldn't go out of stock every ten seconds. I'd argue it would be better to have $480 5870's in stock for each of us to consider buying than the situation now, where we cant get them at all.

Basically what your saying is you think no one should be able to buy a 5870 for $379.00 if you can't. That's ridiculous. You're a consumer, yet you are seriously advocating for the rights of a corporation. Do you understand that in your scenario everyone loses?

Also, don't pull the 'nobody NEEDS a video card" card. Everyone NEEDS health care yet you basically implied the same argument as a reason not support giving it away freely.
 

kllrnohj

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I thought company don't make much if any profit on the game consoles themselves.

Most consoles sell at a loss, the Wii was one of the rare exceptions that made a profit on each console since day 1. Nintendo made a killing on the Wii.
 

Mr. Pedantic

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I'd even ask whats the difference between this and Apple selling iPod touch that probably costs $100 to make for $230? Or Nvidia introducing the GTX280 at $600 last gen, only to be forced to slash prices rapidly when 48XX came out? All are cases of demand leading to profit.
I would have been fairly pissed off if I had bought a GT200 card back then, only to have it depreciate by about 40% in about a fortnight when the 4800 series came out.

Sure based on shortsighted economics theory it is underpriced. However, ATi/AMD is doing the right thing in keeping the price low. Supply will catch up shortly. The reason why they are doing the right thing is mindshare. People would be much more pissed at AMD if they were price gouging at launch then they will be with the cards being sold out. The high end cards are not the profit centers for this business. The high end cards are marketing tools. You get the enthusiast community happy with their expensive high end card and that will help trickle down to the mid/low end where the real money is. If the enthusiasts are happy with their 5870 they will recommend the 5770/5670 to people. The battle here is to gain marketshare, not to get tons of profit on the 5870.
Exactly. And AMD desperately needs market share. 40% of the market the last time I checked, I think it was (not counting Intel). Profits are easier to come by than loyal customers. Therefore, I would think it makes sense to cut prices now for the 5850 and 5870, to reap in the real money from not only the lower-end cards from this generation, but also enthusiast-grade cards from the next generation and onwards.
 

RADEoN

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We will see how theoretically low the 5870 is when nVidia releases a product that makes the 5870 look standing still. Then we'll see how much faster the 5870X2 looks, and how much more it costs.
 

Zez.

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You're applying textbook economic jargon to a unique situation that requires individual analysis, not statements of economic law that exist for generalities.

When you actually understand all elements at play here, then you can formulate a wholistic argument.
 

Sycraft

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No it's not, because a real market isn't as simple as the two curves you were taught in ECON 200. There are many other factors at play. A few reasons why ATi might wish to keep the price at its current level:

1) The "price shelf" mentality. While you would expect demand to be a smooth function with price, it isn't. What you often find for products is there are various "shelves" meaning when you hit a certain level, demand drops dramatically. So you have plenty of demand for a product at $19, you raise it to $21 dollars and suddenly you have almost zero demand. It is strange, but it is how human psychology works. As such you can't always smoothly scale price. This is particularly true when you hit "zeros" boundaries like $399-$400 and so on.

2) Future sales. Another thing you discover with pricing, is that people can get it through their heads that your thing is "expensive" even if it later comes down in price. You charge a lot out of the gate, and they'll decide that your product costs a lot and stop looking. This is particularly true in something like computer graphics, where there's a lot of alternatives. What can well happen is someone goes and sees the 5870 is $800, they see the 4870 and 285 are $300 or less. They say "Oh, well I guess DX11 stuff is just too expensive, I'll get one of those instead." Now they have a card, and they are no longer looking. The customer is gone. They aren't going to buy another expensive device in a couple months when the price is down.

3) Scarcity can drive sales. Sounds funny, but it is true. When things run out, people assume they must be a hot item and thus they want one, even if they weren't as interested to begin with. Worked very effective for Nintendo with their Wii. While the initial shortages were legitimate manufacturing stoppages, Nintendo deliberately kept the product in short supply to keep the hype going for a long time.

4) Retailer cooperation. Remember that ATi doesn't give cards to the retailers and order them to sell them. What they do is make the cards available for sale to the retailers at a given price, and the retailers then choose to buy them or not buy them. If ATi charged a massive price, the retailers might simply give it a miss. They'd decide to wait until it came down, as they don't think their customers are interested in paying that much.

5) The competition. ATi has no idea what nVidia is doing. While it may be (and looks like probably is) that they don't have anything ready to go, maybe they did and were just waiting. Maybe they had cards waiting to ship, and were going to drop them on ATi on release day. Well, you'd be all kinds of screwed if they did that and undercut you by a massive amount. ATi didn't know what nVidia would be doing with regards to that.


So all in all it just isn't simple. You don't just try and set the price to the maximum that you can get a single sale for and then slowly back it off to get more sales. That ends up not working in the real world. You have a lot more things to contend with.
 
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I thought company don't make much if any profit on the game consoles themselves.
For most consoles, they sell at a loss for the first couple years, then they eventually start making a profit. The 360 started making a small profit last year, I think. Microsoft still lost like $1-2 billion on the 360, though.
 

DMystikaLD

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Here's what I mean...in true free market, there is NEVER a shortage of any good! Why? Because the price simply raises until it meets demand.

Whenever you see a shortage of a product, such as 5870, you should realize shortages occur when the price is held artificially low. Classic economics. And a good point for our health care debate I might add (you can bet when health care is free, shortages are inevitable, just like the ones in Canada and UK right now, :p, but I dont want this to be political so lets ignore that).

So what am I getting at? Newegg should have the 5870's priced at $480, $580, or whatever it takes to keep them not sold out, and make a nice profit for themselves. People would whine, because we're conditioned to be anti-capatalist, but there's nothing wrong with it, nobody NEEDS a video card. And this way, they wouldn't go out of stock every ten seconds. I'd argue it would be better to have $480 5870's in stock for each of us to consider buying than the situation now, where we cant get them at all.

And if newegg raised the price, well ATI is missing out on free profit, so ATI should be the ultimate one raising prices.

Sure, this would only last a few weeks, until supply caught up with demand, then theyd be back to whatever price ATI set as the best price right now. Which I personally suspect would be more like $450 all the way until Nvidia gets competition out, but then again I could be all wrong about that, and ATI may well make more by selling more volume at $380.

I'm always reminded of this whenever new video cards come out and "sell out".

I'd even ask whats the difference between this and Apple selling iPod touch that probably costs $100 to make for $230? Or Nvidia introducing the GTX280 at $600 last gen, only to be forced to slash prices rapidly when 48XX came out? All are cases of demand leading to profit.

Even take it to game consoles..every Wii that sold for $400 on ebay for like the first two years of it's life, was money Nintendo missed out on. If it's okay for thousands of people to resell Wii's on ebay for profit, why not Nintendo?

Only really works if everyone does it... which they won't -- attracts customers for future products if they don't price gouge.
 

needmorecarnitine

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Actually, on second thought, I'm pretty sure the 5000 series will drop by $100 by the time nVidia rolls out with their card, if only I can wait that long....


that depends on Nvidia's performance and pricing. Assume that the new high end card from them has inferior performance to the 5870. Why would ATi want to drop prices on their card unless Nvidia charges a lot less for theirs?
 

LittleMeEgo

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You're a consumer, yet you are seriously advocating for the rights of a corporation

"First they came for the communists, and I did not speak out—because I was not a communist; Then they came for the socialists, and I did not speak out—because I was not a socialist; Then they came for the trade unionists, and I did not speak out—because I was not a trade unionist; Then they came for the Jews, and I did not speak out—because I was not a Jew; Then they came for me—and there was no one left to speak out for me."

Or to quote a nice line from Star Trek TNG:

"The first time any man's freedom is trodden on...we are all damaged."

Defending reasonable freedoms of corporations protects us all.
 

LittleMeEgo

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Whenever you see a shortage of a product, such as 5870, you should realize shortages occur when the price is held artificially low. Classic economics.

Sure. ATI has a reputation to consider and is probably binding retailers to a certain price for this short period of limited supply until the first buyers are satiated and supply catches up. ATI is allowed to fix their prices. That's part of the 'free market' idea too. It's not a long term shortage though.. Like when the PS3 first came out they were going for $1,000?

But... It's in ATI's interest to keep the price low for the time being. If the 5870 was $600 then review scores would reflect that. Also there is, as some posts here show, a high degree of intolerance towards anything perceived as free market economics where resellers like newegg could mark the price higher as they would surely like to. So the 'free market' responds to public demands to not gouge the consumer. Free markets can and do adapt in order to protect the image of the market. Being viewed as a bunch of greedy price gouging scoundrels by a bunch of greedy consumers who don't want to pay real market prices is the market at work.

And, no, we don't really have a free market but people today think that because they can buy things that it is a 'free' market. We have market economics but no free market really exists today. For example, you and I are forced to pay with certain currencies, like the Euro or the Dollar. These currencies are counter to free market economics because they heavily restrict free markets. Thats a whole nother topic. We just don't have free economics in the world today. We have corporatism.
 
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RamonGTP

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Even take it to game consoles..every Wii that sold for $400 on ebay for like the first two years of it's life, was money Nintendo missed out on. If it's okay for thousands of people to resell Wii's on ebay for profit, why not Nintendo?

Tell me, how well did that work out for Sony and the PS3?

They had the majority of the market share prior to the PS3's release and are dead last now based almost solely on the pricing alone. Simple economics isn't so simple when you're not considering ALL of the trade offs. It would behoove you to look at the big picture instead of being so concerned about a short term supply shortage.
 
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