Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts

Wednesday, November 14, 2012

A failure of the free market?

I am no economist, so take this with a big pinch of salt. I am writing this as someone who loves to tinker and fix stuff. I have noticed that often consumer products have a simple mode of failure that could have been prevented at a very small incremental cost. For instance, a plastic bracket is used instead of a metal one or not enough plastic is used. Or a wire is too thin and breaks when cables are flexed too many times (two nights ago, one of the remote control wires for my beloved Logitech Z-2200 speakers broke for a second time; looking at the web, this may be a common mode of failure, at least for the Z-2300, which has the same remote control; I fixed it, but ended up dripping solder over the circuit board, and after cleanup, it may not be quite the same).

The additional cost of metal brackets, more plastic, thicker wires and similar simple upgrades would typically be no more than 5% of the total price, and might extend the length of life of the product by a factor of two. This would be a good thing for the consumer and the environment. But there is little in the way of incentive for this, except in the case of a few kinds of items (major appliances, motor vehicles, boats, etc.), since such things are well hidden from the consumer. Brand-loyalty might help here: consumers might notice that X's products last a long time. But this may be counteracted profitwise by the fact that if X's products last a long time, consumers buy replacements less often.

Maybe, though, there is no added utility from that 5% price increase, because maybe such a high percentage of consumers upgrade before the item breaks down that there is no net benefit to consumers.

And, no, I am not advocating for government regulations here: that's likely to result in even worse consequences.