Price Discrimination and the "econobox" - Fuelly Forums

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Old 06-26-2006, 09:14 PM   #1
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Price Discrimination and the "econobox"

I was doing some thinking on this thread and had a bit of a revelation.

Perhaps the reason why we see nothing of any great worth in the FE scene is because of price discrimination.

Quoting here from altruists.org:
Quote:
A company's profit is the difference between the income it derives from customers and the cost of providing them with goods or services. The pressure to increase the difference between the two is supposed to correlate with efficiency. However a combination of factors, especially some of the properties of the information-based economy is actually making financially profitable businesses increasingly inefficient at allocating resources to promote the public good.


Intel actually paid to impair the functionality of their 486DX chips by destroying the co-processor units. Profit maximization is very wasteful.

When Intel developed the 80486 CPU, they produced two versions: the 486DX (with a co-processor) and the 486SX (without). This had nothing to do with the production technology - it was purely a strategy to maximise earnings. In fact they made 486SXs by taking 486DXs and then overvolting (by passing too much electricity through) the coprocessor chip. This process both cost money and decreased the desirability of the chip, but it made perfect economic sense. Why?... so they could charge high prices to customers with a great need of computing power (who bought the DX) and have a non-competing cheap product (the SX) to sell to users without such high demands.


Compaq deliberately nobble hard drives, decreasing their effective size. The IBM LaserPrinter series E was identical to their standard LaserPrinter series, but had a chip to induce wait states, reducing the printing speed from 10 down to 5 pages/minute.
This apparently bizarre method of maximizing revenue, price discrimination, is absolutely standard. It results in countless inefficiencies such as multiple products being bought where one would do, unnecessary upgrades, deliberate damaging or even disposal of working products, the building in of redundancy and the attaching of inconvenient restrictions on product use. Customers and the environment both suffer - all in the name of 'profit maximisation' with its distorted view of efficiency.
Note how it was actually economically viable for Intel to cripple the 486DX chip to turn it into a 486SX! Although counterintuitive, I suggest that this is one of the primary reasons for the "econobox".

Automotive companies still want to market to the price-conscious buyer. However, if they intentionally cripple the product by using poorer plastic, make it rattle, have less modern conveniences like cruise control, less room (econobox), ugly shape, then they prevent richer segments of the market from buying them and so maximize their profit.

This was one of the secrets of Alfred Sloan. The rise of GM was based on price discrimination - myriad styles changing yearly, all aimed at different segments of the market and priced at what those market segments would bear. As a result, Ford was forced to match GM's practices.

Hence, that makes the most sense as to why we haven't seen a really good, cheap vehicle.

Argh.
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Old 06-27-2006, 05:14 AM   #2
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The environment sure does suffer.

The Earth has limited resources. Shouldn't they be conserved instead of wasted? Future generations won't be able to have our living standard because of intentionally inducing consumption for corporate profit because the resources won't exist in the future.

It's disgusting. Our 1st world living standard does not need to have the level of consumption it does for the quality of life present. We could probably reach a point of sustainability without even decreasing quality of life! This would free up all sorts of resoures to lift people out of poverty.

Overpopulation is a direct result of poverty. People in poverty have as many kids as they can due to high infant mortality rate, in homes that some will be able to work and some will be able to care for the parents when they're old and can't work.

We could free up so many resources so that these people can have basic necessities and luxuries, and prevent the populatuion from getting too high.

But that isn't happening. Corporate profits and economic growth seem to matter more to the power elite.

So instead, we will get the future that the most pessimistic of cyberpunk and post-apocalyptic science fiction can conjure up. The fortress world. All because of the greed of the top 1% of the world's population outweighed the future of the other 99%.

We don't have EVs because of the need to maximize profits. We don't have 80 mpg biodiesel full-size luxury cars because of the need to maximize profits. We don't have adequate mass transit so that car use is an option(and not necessity), all to maximize profits. We have an unconstitutional war on drugs and war on terror, due to a need to maximize profits. We are curbing civil liberties from all directions, to maximize profits, because it supposedly makes us safer. What's good for the corporations is good for us all, right?

When it all comes crashing down, will that top 1% own up to it? Nope. They already have their golden parachutes lined up, taking hold in gated communities, whos security is getting ever more militaristic, while the rest of us suffer as a direct result of their excesses.
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Old 06-27-2006, 08:16 AM   #3
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Toecutter, that tirade sounded almost communist to me. I have no problem with that, but you have to admit that we have a lot of cars from which to choose in this capitalist society. A lot more than just Russian Zils and Ladas.

I'd love to "grey market" import the VW Lupo to America so that consumers would have a really fuel efficient and affordable vehicle choice. I'll bet some would sell to those like you and me, but they'd be outsold by SUV's 100 : 1.

The basic trouble is that most Americans see fuel efficient cars as "cheap". I think that's why hybrids sell. They're decidedly NOT cheap, even if they are efficient. I think that's why diesels sell too. They're a "premium" vehicle.

The only car company that ever marketed efficient cars well was Honda. They charged a premium for their "HF" models. It was smart marketing, but they abandoned it in favor of selling even more expensive hybrids. A smart business move.

I'd love it if GM offered a premium "HF" pickup truck: a 4.8L truck with "Displacement on Demand", GM's (rudimentary) VVT, and a tall rear axle and 15" tires with forged aluminum wheels.

GM already makes a 4.0 V6 with those goddies. Take them out of the cars and put it in your trucks, dammit! I still say that a full size pickup can get 30 mpg if properly designed.
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Old 06-27-2006, 10:18 PM   #4
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Quote:
Toecutter, that tirade sounded almost communist to me.

Nothing to worry about. My views lean towards Libertarianism more so than they do towards Marxism.


But I cannot let my world view get in the way of the facts. Normally, I'd be entirely for a free market society, but when the 'market' cuts the consumer, the employee, and the population affected by business practices out of the decision making process, it has gone too far and is a rigged market, hardly free by any stretch of the imagination.


We live in a country where the population possesses a wide array of political views. Their politicians on the other hand hold views in a very narrow spectrum: right-wing on economic issues, authoritarian on social and political issues, held by and large by democrats and republicans alike who have both widely approved of the same legislation that has received so much criticism and revulsion from the American public(Telecommunications Deregulation Act of 1996, NAFTA, WTO, PATRIOT Act, Homeland Security Act, Iraq War, ect.). Hence half the country doesn't even bother to vote, and congressmen and our president have approval ratings in the 30s.


The fact remains that this nation and others are consuming far more of the world's resources than are being replenished, this nation's politicians are curbing civil liberties in effort to maximize corporate profits, and even blatantly violating this nation's constitution to the benefit of certain industries(oil, defense, securities, banking, ect.).


For some it won't matter until the 2nd amendment is finally taken away, but once all the others are gone, count on it. PATRIOT II had provisions to pass a bill that would have banned the private sale of firearms in the U.S. and have registered all gun owners in a national database, also unconstitutional. This was the bill Bush was pimping when Ashcroft was still in this administration! Thankfully, that never went through in its entirety, although certain provisions have been snuck in.


Quote:
I have no problem with that, but you have to admit that we have a lot of cars from which to choose in this capitalist society. A lot more than just Russian Zils and Ladas.

Yes we do have lots of cars to choose from. Any car you want, so long as it requires gasoline, needs constant repairs, and has a cost that correlates perfectly with its horsepower output.

Quote:
I'd love to "grey market" import the VW Lupo to America so that consumers would have a really fuel efficient and affordable vehicle choice. I'll bet some would sell to those like you and me, but they'd be outsold by SUV's 100 : 1.

Not necessarily. Go out by East St. Louis and look at all the lots of unsold SUVs and trucks. GM can't get rid of them.


Like the Prius and Insight, sell a 100 mpg car, and there will be an instant waiting list months long.

Quote:
The basic trouble is that most Americans see fuel efficient cars as "cheap".

If one understands the concept of price discrimination, one must understand that this is by design. Fuel efficient cars are made to look 'cheap' on purpose. Aerodynamics, which would lead to great fuel economy, if by and large ignored.


Quote:
I think that's why hybrids sell. They're decidedly NOT cheap, even if they are efficient. I think that's why diesels sell too. They're a "premium" vehicle.

Yup. But just because they have a price premium doesn't mean cheaper cars need a cheaper-looking finish by design.

Quote:
I'd love it if GM offered a premium "HF" pickup truck: a 4.8L truck with "Displacement on Demand", GM's (rudimentary) VVT, and a tall rear axle and 15" tires with forged aluminum wheels.

GM already makes a 4.0 V6 with those goddies. Take them out of the cars and put it in your trucks, dammit! I still say that a full size pickup can get 30 mpg if properly designed.

More. See this article:


http://www.evworld.com/view.cfm?sect...le&storyid=870


The truck above wasn't full size and was a V6. But it only addressed aerodynamics. That alone gave it a 30% increase in highway fuel economy.


Take a full size truck, give it the proper aerodynamic modifications, add a diesel with displacement on demand, LRR ties, synthetic transmission oil, a taller gear ratio for the final gear, and I'm rather confident such a truck could have 300+ horsepower and get over 40 mpg highway and 25 mpg city. This is with no hybrid drive or new technology.


Making the truck a plug-in hybrid would make that more like 35 mpg city, 45 mpg highway if you don't use the plug, and 60+ mpg combined with use of the plug.
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Old 06-27-2006, 11:39 PM   #5
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Originally Posted by The Toecutter
If one understands the concept of price discrimination, one must understand that this is by design. Fuel efficient cars are made to look 'cheap' on purpose. Aerodynamics, which would lead to great fuel economy, if by and large ignored.
Yes.

I suspect that the reason why this works is that the average person is highly suggestible and is highly influenced by his viewing and reading habits. It is no coincidence that modern marketing, television and radio all happened in the twentieth century. Modern marketing depends on the latter two. (And cheap energy; without cheap energy there is no discretionary spending for modern marketing to work on)

There is way more potential for profit via price discrimination with automobiles than there is in marketing a good quality, highly efficient, inexpensive car for the masses.

If your car costs $7-25,000, but you can sell it for anywhere from $9,000-70+000 because that is what people are prepared to pay in order to get what they want, you can structure your whole set of offerings so that people pay as much as they are prepared to pay and no less.

With that profit margin, combined with the cost of these goods and the number of people who buy, you can afford to saturate the average person's listening, reading and viewing time with ideas about how great your products are. You can afford to line the pockets of all the automotive magazines. You can afford to have dealerships with well trained salesmen in every town.

And so, the norm is to spend all your money on an inferior product that everyone else has. The end result is that those who are "different" and go against the norm are laughed at, criticized, etc.

But we must remember that although the television has enough power to cause some women to actually forego the essentials of life (food, calories etc), it does not have this power with everyone. When more people are forced to choose between television instilled values and eating, shelter etc, they are going to choose the latter.

And it is happening as we speak, those SUVs sitting on the lots are a case in point. I bought my Mira recently, and the salesmen are definitely noticing the trend of small cars being easy to sell and big cars/trucks hard. Mine only stayed about 2 weeks, and if I hadn't have bought it, someone else was coming to see it that very afternoon (it was on a weekend, I had test driven the car earlier that week).

Another thing that will aid the movement towards low-cost motoring is the internet. As more people spend more time on the internet, interacting with each other and not passively receiving "programming" from a box, they will tend to converge towards a solution that suits their needs and pocketbook rather than the pocketbook of an advertiser.
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Old 06-28-2006, 12:00 AM   #6
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Another thing that will aid the movement towards low-cost motoring is the internet. As more people spend more time on the internet, interacting with each other and not passively receiving "programming" from a box, they will tend to converge towards a solution that suits their needs and pocketbook rather than the pocketbook of an advertiser.
And that is why the corporations are trying to do away with net neutrality. To hell with the 1st amendment if it reduces sales and profit margins!

I will never, ever, buy a new car unless it meets either of the following archetypes:

1) The lightweight, affordable sportscar. Must have at least 300 horsepower, mid-engined rear wheel drive, cost under $25,000 new, weigh under 2,000 pounds, and get at least 25 mpg combined on any liquid fuel, even gasoline.

2) The efficient alternative-fueled musclecar. Must have at least a 400 horsepower B100 or E100 compatable engine with a minimum of 8 cylinders, rear wheel drive, cost under $25k new, seat 5 adults, and get at least 40 mpg combined.

3) The cheap battery electric supercar. Must obtain 0-60 in under 4 seconds, at least 150 mph top speed, weigh under 2,000 pounds, and cost under $40,000.

4) The hypercar. Must get at least 90 mpg on B100, weigh under 2,000 pounds, top 160 mph, and cost under $30,000. (ie. Opel Eco Speedster)

All three of these archetypes are technologically and economically feasible.

See www.mulhollandraceway.org for details. Read specifically the articles in their politics section about the old gal getting too fat.
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Old 06-28-2006, 12:37 AM   #7
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good read, thanks for enlightining my buzz, although I'm annoyed because cars like the yaris, fit, or versa or any hybrid/diesel are tough to buy because dealers are refusing to budge their MSRP asking price, plus high demand does not help as well being on a waiting list.

Then you go look at the gas guzzler, under MSRP easily, BULL$|-||T damn gas prices sure made some cars cheaper and made the essential cars even more expensive to buy! A R G H ! ! !
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Old 06-28-2006, 12:28 PM   #8
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Then you go look at the gas guzzler, under MSRP easily, BULL$|-||T damn gas prices sure made some cars cheaper and made the essential cars even more expensive to buy! A R G H ! ! !
Yeah there is less demand for guzzlers and more demand for fuel effcient "econoboxes".
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Old 06-30-2006, 01:24 PM   #9
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Interesting read along the lines of this thread.

http://www.rmi.org/sitepages/pid390.php

Good info if you follow the Reinventing the Wheels link at the end of main article.

EDIT: Okay, I swear I hit "New Reply" in the Designing an FE Car from the ground up. thread...that's where I meant to put these links.
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Old 06-30-2006, 05:56 PM   #10
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Originally Posted by 95metro
Interesting read along the lines of this thread.
Yep. Reading hypercar info back when I was into my performance phase was very interesting to me, and has shaped a lot of my thinking.

Just the fact alone that less than 1% of an automobile's energy is actually going to move the driver indicates that there is major low hanging fruit waiting for someone to pluck it.
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