In an idealized market, of course, manufacturing capacity would ramp up with demand, but that's because price does, too. In reality, while the market price will go up enough for scalpers to play arbitrage, the producer doesn't capture this surplus and has no incentive to increase quantity supplied.
You almost always want to undershoot.
It would have worked like this for some period of time after the announcement but before the official release dates Apple would sell you a numbered product at a multiple of the announced retail price, the earlier the date, the higher the multiple. So the very first iThingy would go for say $100,000 and the next batch might go for $50,000 each, and the third batch would be priced at $25,000 and so on. This would let them practice almost perfect price discrimination; most customers would pay what the product was worth to them...
There are of course very good reasons Apple does not do this.
Or are they trying to create an image of scarcity and desirability?
Once you factor in risks like that, selling a few models at an extreme markup doesn't seem quite as attractive.
By the way, it may be rational for companies to let this happen, since mass production facilities cost a lot of money to set up, and they have to aim at the longer term demand instead of the spike at the beginning.
Very common for tickets(concerts, sports etc)
Notice how he specifically mentions a price for the "eBay hoarders", but avoids mentioning his markup. I wouldn't be surprised if his markup was close to $150 as well without actually ever being over. Like somewhere around $140.
His story is contrived in a way to give you a good impression of him and a negative one of the Apple store employees. Another couple of telling parts in the story are: "reservations are limited to one per iTunes account. Luckily I have a second account so I used that to place the reservation" and "Ok, so the gig is up" followed by a whole unnecessary conversation.
The first quote shows that he knows that what he is doing isn't exactly kosher with Apple. He is willingly and knowingly flaunting their policies.
The second quote shows that he realizes he's been had. He already knows why he was busted, but he persists in trying to troll the employees into saying something slanderous, like euphemisms for the fact that he's an unauthorized reseller.
I call into question the morals and ethics of the author of the post.
(I jest, but to make a point.)
And to hell with the Green Bay Packers, if only their season tickets were more expensive, all those middle class people in rural Wisconsin wouldn't be able to afford them and the decades-long waiting list would just dry up! Stupid corporatists and their 3-4 defense.
June 5th, 1999: The New York Knicks are playing the Indiana Pacers in the NBA playoffs. At the time, I'm living in New Jersey, and I'm heading into Penn Station to go home. A scalper walks up to me (and everyone else, I suppose) and offers me a ticket to the game. The ticket's stamped price is $100 (maybe $125). The scalper wants $450. I think about it, think about it, think about it. I pass.
Hours later, with just over 6 seconds left in the game, Larry Johnson wins it for the Knicks with an amazing, once in a decade 4-point play. I'm at home, jumping up and down, screaming. (Links below for the play.)
So, yeah, that's a service charge, but not quite like Ticket Master.
http://sportsillustrated.cnn.com/basketball/nba/1999/playoff...
http://www.youtube.com/watch?v=h3pGGjdBzns
http://www.youtube.com/watch?v=WA7JVEHbuG4 (Less drama, more basketball version of the video)
Thanks for reminding me of that. Wow!
There was a beer tasting event I went to a few months ago where tickets were ~$60. I showed up really really late (I was the designated driver anyhow) and got mine for something like $15 (which was cheaper than what the promoter was offering the "designated driver" tickets [which don't allow you to drink the beer] for).
Modern scalping constitutes a far larger fraction of the market, and consists entirely of artificially limiting supply. You don't think those pop teen idol concerts would really naturally sell out in 30 seconds, do you? That happens because somebody's running an automated system that hammers the online purchase form.
Sometimes people want to sell things for below their cost, to let more people enjoy them than otherwise would. A scalper takes advantage of this incorrectly low price, buys the item, and resells it for it's true market value.
They do not up market value (they up price). It is a side effect of artificial supply limit by the original vendor.
If there is no artificial limit (tickets for example), it means that the price was too low in the first place and buyers are willing to pay more.
Scalpers are market-based correction tool.
Yes apple could have made the launch price higher - but then they would have to lower it after the launch to get the rest of the customers.
But the last time they did that, there was a firestorm as all the early customers were very mad at the very quick price reduction.
So apple chose to start at the more longterm price.
The correct way for them to handle it would be a premium or collectors or limited time edition. AKA the first ### buyers get a special dodad, or a signed shirt or some item to make them feel important. Then they pay extra, and don't feel cheated when it goes on sale at the regular market price.
Think about any commodity... everyone needs sugar/salt, what if somebody starts buying all the sugar from the market and hoards it... some people will start consuming less but the prices will increase due to lack of supply and more or less constant demand.. and then the person can open floodgates and make some dough in the process... Pretty common in Third world countries (and hence illegal)
This is often what happens but it isn't a necessary condition to be a scalper. You can sell tickets for at or even below the initial cost and still be considered a scalper.
Indeed many scalpers often unload tickets for less than face value if they can't find a buyer at the price they want.