Slate's "Everyday Economics" column takes a look at the pricing and shortages relating to the Xbox 360. Economist Tim Harford writes of the shortages, "... there is no such thing as an absolute shortage of anything: There is only a shortage if the price is too low." Since they haven't raised prices, it ensues they must want shortages, "... you can get just as much publicity by raising prices as you can by selling out at low prices. But raising prices makes money, and creating lines of frustrated customers who can't get the product doesn't."
He veers off course when he writes, "Microsoft could create the same cachet by selling the same limited number of units at a higher price. In any case, it's not the Hope diamond, it's just a game console. How valuable can this so-called cachet be?" This is what he fails to appreciate: it isn't incompetence or low cost that has created this cachet, it's the very fact that they have sold out; that people can't find one even though they're willing to pay for it. If the unit retailed temporarily for $700, only the wealthy or obsessed would be interested. For the majority of American, it would be easy to dismiss such a frivolous purchase; to see it as part of a devious strategy by a massive -- and often unpopular -- company. I fail to see how this would provide Microsoft with anything more than money, something they are more than willing to spend to succeed.
