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Old 05-06-2009, 12:19 PM   #5
markbot
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Posts: 595
Karma: 7511929
Join Date: Apr 2007
Location: New York, NY
Device: Amazon Kindle Touch
Amazon is using a price skimming strategy, which is the correct strategy for an innovative tech device. they want to extract as much producer surplus as possible from "innovators". the demand curve is downward sloping, so u have the fewer innovators who are willing to pay a higher price....as more people "imitate" the technological diffusion will spread attracting more mainstream buyers...and amazon can thus lower the price when volume increases (and they'll have to do this to attract the mainstream buyers with lower "reservation prices". so it'll be able to breakeven at a lower price....and also the increased volume will further "the learning curve" so the cost of producing the kindle will decline perhaps, thus lowering cost and price with it.

so i would say, we should expect a sizable price drop by Christmas on both devices....like $50.
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