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Could Low Wii Supply Drive Up Demand for Its Competitors?

The Wii is, of course, the hot-ticket item this Christmas, just like last year. And once again, there aren’t enough to go around.

Micah and I frequently watch G4, the “geek” network. During one of their news segments, G4 brought in some people to discuss the Wii supply and demand problem. Some hinted that Nintendo was doing this on purpose to keep demand and prices high.

One of them, however, thought that the low supply would actually hurt Nintendo and help their competitors. How? He put forward the following scenario.

First, most of us can agree that if Nintendo produced a thousand more Wiis, they’d jump right off the shelves. So unless Nintendo is selling Wiis at a loss, they’re avoiding some profits.

Maybe they’re counting on people staying in the buying mood until they can actually get there hands on one. This is where the commentator found the hitch.

Suppose that you’re a parent who’s been desperately trying to get their hands on a Wii for the last few months. If you can’t get one, at some point you just give up. Christmas is 10 days away. You start to look for alternatives.

If you have 2 kids, you could spend the same amount of money on getting them a couple Nintendo DS‘s. Or maybe you never got the X-Box 360 or GameCube…and you get one simply to have a new gaming system to offer your children. Even the expensive PS3 is looking good compared to some Wii prices.

Now you have the chance to buy a Wii in February. But it’s not Christmas anymore and you already spent your Wii budget on the PS3, PSP, XBox 360, Nintendo DS…whatever.

I’ve played the Wii and it’s one of the only systems that I can actually handle (I suck at gaming, it’s sad). It’s a lot of fun. I recognize its value and I doubt that there’ll be a time in the next few years where Wiis will sit forgotten and forlorn on Best Buy’s shelves. At the same time, I think that Nintendo is unwise to keep its supply so low at this time of year.

What about you? Are you searching for a Wii? Would you consider buying a competitor just to have something under the tree?

Note, there are a number of affiliate links scattered throughout. I didn’t feel like marking them all, but you’ve been warned…

photo by Marcin Chady

{ 3 trackbacks }

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Eden December 14, 2007 at 9:18 pm

I don’t think the Wii supply is intentional. Like you said, they are leaving money on the table and losing customers.

If I didn’t already have a Wii I would definitely buy an Xbox 360 now. The Wii is a lot of fun when you have friends over, but the Xbox is better for ‘hardcore’ gamers.

remodelingthislife December 14, 2007 at 9:52 pm

i want one. yep. little ol’ frugal couldn’t care less about what the joneses have me wants one. and no substitute will do πŸ™‚

Hilda December 14, 2007 at 10:15 pm

I’d like to get a Wii too but I’m not willing to run around looking for one. I’ll just wait and no substitute for me either.

Flexo December 15, 2007 at 2:22 am

I picked up a Wii for my girlfriend several months ago. It entailed going to a Toys-R-Us before it opened, lining up, and getting a number. it was kind of a hassle, but we all enjoy it. The low supply is probably at least a little intentional. They could ramp up production, but they are making the most of the buzz that goes with the “hunt.”

I imagine it won’t be long until other game systems have similar controllers and similar games. With the other systems’ higher quality audio, video, and more in-depth game play experience, I don’t think Nintendo will be able keep up.

Paul December 15, 2007 at 3:24 am

I personally don’t think that the Wii supply and demand problem is intentional. Even the Nintendo Wii Marketing manager said once that the shortage is “embarassing” for the company. Other reports have said that Nintendo could lose over $1 billion in revenue. I don’t think a company would intentionally lose one. I have been trying very hard to get a Wii myself because it is a lot of fun, but people on Ebay are sure having fun selling them if they were lucky enough to buy one in the store. Wait and the demand will go down eventually and the stores will start stocking them again.

PiggyBankBlues December 15, 2007 at 11:25 am

i was in elementary school when atari came out with pong and it’s honestly the only game i’ve truly enjoyed, which makes me either a neophyte or a geek. probably both πŸ™‚

after that i just didn’t find computer games as fun as playing football in the back yard. i enjoy more the technological wonder of it or the graphics, but playing them doesn’t do much for me. i’m sure i’m missing the whole point…

mrsmicah December 15, 2007 at 5:38 pm

Like you, piggy bank, I can play pong, pinball, that kind of thing. But I can’t do Halo, Zelda, any of those. I spent a fair amount of time in college watching friends play and enjoying the graphics, strategies, etc.

Wii’s “Wii Play” pack is probably the closest thing I’ve seen to pong and such. I think it even has a pong equivalent. Air hockey, that kinda thing.

Hee hee…it has an updated duck hunt. You get to shoot more than ducks, depending on the level. Another one that I could play back then. πŸ™‚

Heidi December 15, 2007 at 7:34 pm

I believe there was a New York Times article on this earlier in the week – it concluded that the shortage is hurting Nintendo.

We have one under our tree – I feel like a little kid – the anticipation is killing me!

Andrew Stevens December 15, 2007 at 11:25 pm

The person who thought it was hurting Nintendo has good economic instincts. It is not possible that this shortage can help Nintendo, and therefore I seriously doubt that it’s intentional. To explain this simply: the fact that there are people who want to buy the Wii at the price Nintendo is charging, and can’t buy it, indicates that Nintendo could be charging an even higher price so that the quantity demanded declines to a point where there are no such people. But they’re not doing that. Therefore, this can’t be intentional unless Nintendo is run by a bunch of people who don’t know very much about economics or finance, which I highly doubt.

While it’s certainly true that monopolists can sometimes make a larger profit by producing less than the quantity that would be produced in a purely competitive market (and charging a higher price than a purely competitive market would charge), they would still produce enough that anybody who wished to purchase at that price could do so. I.e. there still is no shortage in such cases.

In fact, since Nintendo clearly could be charging a higher price for the Wii right now than they are doing (and make more money thereby), they are intentionally foregoing some profits in order not to lose the goodwill of those people who are lucky enough to be able to buy the Wii now. (If they charged the logical market price, given the amount they’re actually able to produce, these people would be paying a much higher price than people would eventually pay once the shortage disappears. This would likely cause those people to feel “cheated” and they’d probably be quite angry at Nintendo. In my opinion, this is irrational. They’d be paying a higher price for the convenience of having it earlier, i.e. they’re getting exactly what they thought they were getting for their money, but people aren’t rational, by and large, and Nintendo knows this.)

CatherineL December 16, 2007 at 12:02 am

Hi Mrs M – I am one of those lucky few who managed to get hold of a Wii. My daughter never usually asks for anything expensive – until this year.

We only managed to get hold of one because my husband called the local Tesco and they’d just had 20 delivered. And luckily we didn’t pay over the odds for it.

But, she wouldn’t have minded if we couldn’t get one as she knows all about the shortage anyway.

I think what does suck is that as soon as there is a shortage of these things, people buy them up and sell them on places like ebay for a hefty profit.

SavingDiva December 17, 2007 at 10:21 am

I’m so over the Wii!

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