Is consumer sentiment against overcharging producers a bad thing?

[lfromnj]

https://www.slowboring.com/p/restaurants-should-charge-more-for

I was thinking about this for the past year. Basically NVIDIA and other gaming chips were being sold by scalpers for huge profits and NVIDIA said they didn't have enough capacity. But the question is why didn't NVIDIA just charge more if they had a shortage of supply? Some theories are that it basically hurts consumer perception. But in this case if consumers are still willing to pay more for a chip why shouldn't that extra surplus just go to NVIDIA rather than some scalper who isn't actually doing much economic benefit to the market. NVIDIA can then use that extra cash to reinvest and produce more chips which would lower the price for future consumers. Unfortunately it seems that for a lot of people if they charged more it would have hurt their reputation more than they would have gained in profit.

[Benjamin Frank 2.0]

I wrote on something similar to this about 1 year ago.

I've written on this elsewhere and it's tended to not go over well, oh well. Since I think there is a better understanding here of economics maybe it won't be so bad.

I took a bunch of my father's books to a free enclosed shelf library, one of those donate a book/take a book things. I don't know if your town has them but they're nice. Anyway, because I have literally no sense of direction I ask a friend to go with me. As he comes over he tells me a friend of his (I've met her a few times) is having her birthday tonight and she's celebrating at a bar. He also says, since you're giving away books, June 16 is the same day that the book Ulysses by James Joyce is set, she'd like it as a present. Great, my father had the book.

Anyway, she really likes listening to live music and there's a band playing there and not even a cover charge. Of course, most people ate dinner there. A bit loud but a very good blues rock band that in the hour I saw them, played 2 Dylan songs and 2 Rolling Stones songs. Very good.

So, this is the thing: I don't defend Ticketmaster's  hidden fees. But, when it comes to say a Taylor Swift concert, thanks to the internet they have two ways to sell the tickets: first come first serve with a face value, or 'surge pricing' (or whatever it's called) where essentially every seat is auctioned off to the highest bidder.

When tickets are sold first come first serve to the highest bidder, scalpers buy up virtually all the tickets and resell them to fans for basically the same prices as through 'surge pricing.'

The benefit of 'surge pricing' is that the money from the scarce tickets goes to the artist. They're the performer, why should leeches (aka scalpers) get the money instead? The reality is, the money will go to either the performer or the leech.

Sure the government could try to ban 'scalpers' or 'ticket resellers' but is there really a public good in that, and is that the best use of scarce police resources, and even if you say 'yes' to both, can the government really stop scalpers?

I said that on some board and got the response of 'so you're saying the artist should become the leech?'

Fine, if a person wants to see it that way, they can see it that way. But, again why should the 'consumer surplus' go to the scalper and not the artist?

This is the important point for me: there is no constitutional right to see Taylor Swift in concert. If you're wealthy, you can see Taylor Swift, if you're middle class and into live music, in cities that Taylor Swift plays in, you can see perfectly fine musicians in music venues with a face value ticket price or a cover charge. But, even if you're poor you can see fine local musicians in bars with no cover charge or low cover charges.

This really is no different than buying a vehicle for instance: if you're rich and into them, you can buy a Rolls Royce, if you're middle class, you can buy whatever midprice or low price vehicles there are these days, and if you're poor, you can take a bus.

Transportation is far more practically important than seeing Taylor Swift, but I don't know anybody who says "how dare Rolls Royce charge more for their cars than I can afford?"

[lfromnj]

Yeah I’m not arguing for a government ban of scalping. People should have the right to resell stuff they own. At the same it just seems inefficient due to cultural quirks.

[nerd73]

I was thinking about this for the past year. Basically NVIDIA and other gaming chips were being sold by scalpers for huge profits and NVIDIA said they didn't have enough capacity. But the question is why didn't NVIDIA just charge more if they had a shortage of supply....

Well, once the dust settled that's exactly what they did with the 40 series. The launch MSRP of the 4080 was almost double that of the 3080, and most other cards also had significant increases in MSRP. It has caused some amount of backlash for sure but the market has more or less accepted it.
In any case, not long after the 40 series launched the AI boom went into full gear and Nvidia once again found themselves selling shovels in a gold rush, so consumer GPU pricing quickly became an academic issue as far as Nvidia's profits were concerned.

[lfromnj]

I was thinking about this for the past year. Basically NVIDIA and other gaming chips were being sold by scalpers for huge profits and NVIDIA said they didn't have enough capacity. But the question is why didn't NVIDIA just charge more if they had a shortage of supply....

Well, once the dust settled that's exactly what they did with the 40 series. The launch MSRP of the 4080 was almost double that of the 3080, and most other cards also had significant increases in MSRP. It has caused some amount of backlash for sure but the market has more or less accepted it.
In any case, not long after the 40 series launched the AI boom went into full gear and Nvidia once again found themselves selling shovels in a gold rush, so consumer GPU pricing quickly became an academic issue as far as Nvidia's profits were concerned.

Fair enough, I do know Nvidia's margins are good. I still don't get the argument for backlash if its almost impossible to stop scalpers and at least here the money can go to the people who created it allowing them to reinvest it.

[Open Source Intelligence]

https://www.slowboring.com/p/restaurants-should-charge-more-for

I was thinking about this for the past year. Basically NVIDIA and other gaming chips were being sold by scalpers for huge profits and NVIDIA said they didn't have enough capacity. But the question is why didn't NVIDIA just charge more if they had a shortage of supply?

This is basically how the live event ticket market works.

[Tintrlvr]

I think a big part of it is that suppliers, unlike scalpers, have to worry about the stickiness of prices on both sides. They don't want to raise prices now only to have to lower them later when demand cools; they would rather have consistent pricing not only for reputation reasons but also for their own financial projections. So they try to price their products for the steady-state of the market. That means that they are slower to react to surges of demand than scalpers, who feel free to change their prices extremely rapidly. If the surge in demand is sustained enough to change the baseline level of demand, prices will eventually go up, just more slowly.