Right, the console isn't the source of most of the revenue (or any, some have been losses). The point is to get them being used with newly purchased games/accessories. The scalpers are actually taking money away from the console manufacturer for the period of time the console is held by the scalper. They're also scalping revenue off the top of the console and having a negative income effect upon the end user/customer of the console - which definitely negatively affects how much the end user/customer winds up sending to the manufacturer.
The only winner here is the scalper though. The customer Microsoft, Nintendo and Sony are put in a lose/lose position.
The customer has a choice on whether or not it's worth the purchase. To the customer who values the item (Wii/Sporting Event/whatever) over the (inflated) cost, it is a net gain, not a loss. To the person who doesn't value it above the asking price, they don't have to pay, and they don't have to get the item.
I bought my Wii for an inflated price on eBay and I have no regrets about it. I have a friend who bought her Wii at an even more inflated price (almost double the asking price, if I remember correctly), and she also had no qualms about it.
Furthermore, scalpers who wait in line for hours to buy tickets/game systems, and then flip it for profit are essentially providing a paid service to those who are too impatient, late, or otherwise incapable of buying said items when they go on sale, knowing that there is a limited supply that will not meet all the demand.
The ebay flippers allow MSFT / Nintendo / PS3 to charge $1000 on launch day so that demand == supply
The only winner here is the scalper though. The customer Microsoft, Nintendo and Sony are put in a lose/lose position.
The scalpers have the highest profit margin while the real fans who buy the extra games have $500+ less to support the companies that are bringing real value to the market.
> But no one says there is a need for this extra liquidity.
The fact that scalpers can sell the consoles for a much higher price shows that there is no market equilibrium with respect to the prices that the console vendors set. To achieve this, console producers could choose two strategies:
a) increase production
b) increase prices
a is impossible because of chip shortages, so b would be the way to choose to achieve "supply = demand" (i.e. everybody who is willing to pay the market price will get a console). Since console producers are not willing to do this move (perhaps for "marketing reasons" à la "our console is this cheap"), scalpers will make use of this market inefficiency, and ensure that the prices are those where there is a market equilibrium.
So, scalpers change the situation from "there is more demand than supply" to "supply = demand", making the market balanced.
Thus, the existence of scalpers is rather are sign that the console producers chose a price that is too low. The existence of scalpers is thus a mere symptom of this bad pricing decision of the console producers.
Scalpers allow people who are not price sensitive or have inelastic demand priority over people who are lucky / first.
The ethics depends on the exact case study provided. If it's a rich person buying an xbox (not price sensitive) - that's one thing, and most people would not support it. If it's someone needing an IC for a heart monitor to stay alive (inelastic demand), most would say that providing them an IC over someone who wants to play the latest video game is a good service.
> You've made the assumption that the supply status quo would exist without scaplers actively exploiting the market en masse, and I beg to differ...the difference is, as of this minute, I can point to over 5,600 reasons on eBay US alone[1] that support my argument.
The scalpers don't destroy the consoles any more than they create them. All they're doing is spreading out the supply over maybe a few weeks - they'll be pricing them to sell before the next shipment from Nintendo arrives. Or else they've made a mistake and are going to lose money for it, which is fine too. Maybe some scalpers are holding onto them for the Christmas rush, but that's just the difference between the console sitting on the scalper's shelf or sitting in a box under the tree - it makes no odds either way.
> You've clearly defined the value added in importing a product to a market where it's not normally sold: work which directly increases product availability.
Scalpers are just import/export across time rather than across space. If it weren't for scalpers there wouldn't be any of this console on sale right now, it'd just be sold out everywhere.
> Scalpers do neither and instead play an unaccountable game of double penetration: first by creating artificial scarcity in the market, then again by immediately relisting at 10-fold markup within the very same market they've negated.
I very much doubt the scarcity is artificial. Scalping is too competitive, too easy a market to enter, for anyone to be cornering the market.
> Irrelevant. You are, of course, entitled to your own valuation of the product.
My point is that it's yacht-like (or, sure, like a $60 trinket rather than a $60k one - let's say a Mont Blanc notebook) rather than food-like. No-one physically needs it, no-one deserves it at a below-market price.
> Nintendo--who has made real investments in and rightfully owns the IP rights to--on the other hand, has clearly valued it at $60 for its end user, profit markups at the OEM and authorized distributor levels included.
Nintendo (who FWIW are notorious for price-fixing and bullying retailers, "losing" shipments for those who don't cooperate) don't get to choose how much people buy or sell the products they own for; it's a free country. If Nintendo can really produce it for less than $60 then they should be selling it for $60 and making money. But they've sold all their stock, and the demand is still there.
Isn't that the fault of Sony for selling them at a lower price than what people are willing to pay?
And the value being provided is the possibility of buying the PS5. Even without scalpers, chances are that someone else would have bought it. Scalping only works when the demand is very high compared to the supply.
Scalpers do hurt innocent consumers, which is why they are so widely hated. Someone trying to buy their spouse a GPU or a PlayStation for Christmas isn't the one responsible for a fragile just-in-time supply chain. Many times, the problem isn't even the supply chain, it's just the fact that demand exceeds the total possible supply, like with concert tickets.
In the consumer space, there are many ways for vendors and retailers to combat scalpers, but their motivation to do so is minimal. They make the same money off a GPU or PlayStation regardless of who buys it.
Scalpers exist when a company chooses to ignore the supply demand curve. The value of a Ps5 is much above the asking price, which is easily seen in the price scalpers are asking. This is similar to video cards as well right now, or tickets to many sporting events.
Scalpers essentially make it always possible for a customer to buy a product if they want it enough ($$$). Otherwise, it's more of a lottery system, if the product is not priced well enough.
This is just arbitrage, and has very little to do with HFT. In a normal market, scalpers don’t exist because when products are flying off the shelves you either raise your prices or increase your production. Game console companies are for some reason unwilling to sell their consoles at auction (which would eliminate scalpers) or increase production so an arbitrage opportunity is born
What are you talking about? Aren't scalpers doing exactly what efficient market hypothesis would suggest by buying products that are underpriced (graphics cards, consoles) relative to demand and selling them at the highest price people are willing to pay?
Except that scalpers are also a part of the market. When a large percentage of original purchases are by scalpers, they artificially up the market value.
Okay, let's discuss ethics. I don't see or have an ethical problem with this. Scalpers are taking a risk, if the supply was greater they lose, if the supply becomes greater before they can move their inventory then they lose. The supply is not greater. It is an amoral reality.
> I'd like to live in a world that isn't full of selfish assholes trying to fuck everyone else over all the time. I understand market dynamics just fine - I got rich from it and I'm a shittier person for it.
It is not possible to live in a market based economy and fulfill that desire. It is very easy for me to accept that. Demand for the asset simply has to dry up. It has not. People that want a PS5 can get one, at the available price. Scalpers are providing liquidity, you provided liquidity. Individual owners would be removing liquidity, likely causing greater premium in price to let one go and further hoops to jump through.
That's not how scalpers operate. They're interested in getting the product off their hands as fast as possible. Given that PS5s are produced in mass quantities, and that supply disruptions are easing, buying and holding PS5s is almost certainly a money losing proposition.
It's odd to me that so many of this kind of thing takes a moral stance and uses comments like "making someone pay" for things like concert tickets or gaming consoles.
I'm not for scalping, by any means, but to claim that it harms the consumer is just weird. The vendor is clearly leaving money on the table, but if you're willing pay 4x to not have to wait a few months...that's just market forces.
The exceptions are forced buyers--but we're not talking critics meds here.
Selling at market price is counterproductive when the product is part of a larger strategy.
Selling Xboxes and PlayStations for many hundreds or even thousands of dollars is counterproductive because platform and game developers use the consoles as a loss leader for the much more profitable software and microtransactions. No one wants to buy the new Call of Duty if there are too few console owners to find a match.
Your example of concert tickets is interesting- Kid Rock famously employs counter-scalping methods because he does not enjoy performing for bored rich people in the front row. The front two rows cannot be bought at his shows- they pick "real fans" out of the cheapest seats randomly to come enjoy the best seats.
There's a growing industry of "resellers" who buy an in-demand product and attempt to sell it for more, and if it doesn't work they can just return it. Larger ticket items like electronics (especially next-gen game consoles) are one example.
Scalping is usually a short-term monopoly based in a temporary shortage, and it has the same problems (arrogation of consumer surplus and deadweight loss).
> Nintendo should be able to sell the NES Classic for 13k
That’s a somewhat different issue, it’s what happens as the result of a legally sanctioned monopoly (copyright) that has been exploited far beyond any reasonable term. It’s still a monopoly and it’s still bad.
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