Is Apple Paving the Way for Oligopoly?

Commenter Bosco Higgins offers an astute possibility as to why Apple might be signalling that they're willing to cut prices, even though this will just encourage consumers to wait:

If I had to guess I would say it is a pricing signal to its competitors (Kindle, Nook, Sony) saying that if they try to compete on price, Apple is prepared to willing to drop iPad prices. It is the old prisoner's delimma on pricing - Apple is trying to establish a cartel price and scare the other participants from defecting.

It's not a bad guess. Oligopolies can be maintained for quite some time with the right signaling games.  On the other hand, I'm not sure how credible a signal they can send.  Apple may eventually make most of its money from content, but right now it's a vendor of shiny hardware, which it sells at a hefty premium.  Amazon doesn't need to command a premium price in order to protect a brand image; they're a discounter, and that's why people like them.  If Apple starts getting into price wars, it's heading into uncharted and dangerous lands.

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Video

Confessions of Moms Around the World

A global look at the hardest and best job ever

Video

A Stop-Motion Tour of New York City

A filmmaker animated hundreds of still photographs to create this Big Apple flip book

Video

The Absurd Psychology of Restaurant Menus

Would people eat healthier if celery was called "cool celery?"

Video

This Japanese Inn Has Been Open for 1,300 Years

It's one of the oldest family businesses in the world.

More in Business

Just In