Stop whining

iPhone early adopters.  (I’m one of them, though a virtuous one.)  You may have heard, they just cut the price on iPhones.  Get this:

“I just felt so used as a consumer,” he said. “They hyped up the iPhone for six months and built up our expectations, and then they grabbed our extra $200 and ran.”

Here is another guy:

“I feel totally screwed,” wrote one iPhone owner on the Unofficial Apple Weblog site. “My love affair with Apple is officially over.”

It is you people, you who resent Coase (1972), you people who induce wage and price stickiness and widen the Okun gap.  You people, who don’t know what it means to sit back and enjoy your consumer surplus.  You beasts! 

And to think you are all carrying around these wonderful icons of modernity in your pockets…


(I thank a loyal MR reader for the pointer.  Please note this post was published from my iPhone.)


I was wondering if I was the only one deeply annoyed by this sort of cluelessness.

The thing that annoys me most about all this is that most iPhone early adopters didn't uneasily spend $600 on the phone. They gladly spent it. They paid to break their contracts with their existing provider. They lined up in front of stores and camped out to spend $600 on the iPhone. People actually paid for spots in line just to have the chance to spend $600 on the iPhone. By any economic account, Apple under-priced the iPhone when it launched. And now these people have the audacity to "feel totally screwed". Forgive me if I'm not sympathetic.

But aren't they to be commended for whining their way to $100 credits?
Tyler, will you abstain from yours on principle?

The early adopters did behave according to economic theory. The annoying thing is that they have the nerve to whine about the intensity of their own preferences! Apple got your money because (for whatever reason) YOU had to have an iPhone RIGHT AWAY. Apparently Tyler is in this group of early adopters, but at least he is mature enough not to complain that more patient buyers are now paying less.

Free tip: if you wait two whole years, you can expect to pay much less than $400 for an iPhone with more storage, features, and style.

These are the same people who think that Apple is "using consumers" when they charge $150 more for a black Macbook than for an identically configured white Macbook. Looking around my law school classrooms, the majority of Macbook owners have gladly paid the premium for the black computer.

It seems to me is that this reaction is because it's Apple (angels singing). Sony introduced their first Blu-Ray standalone player for approx. $1000 late last year. Within two months, they released a new version for HALF the price, $499. I don't remember there being that much reaction... I'm wondering if it wasn't some other company, there wouldn't have been such the uproar. (granted - the products are in two completely different markets).

So, since you apparently don't want the $100 that Mr Jobs is handing out,
is it okay if I take it?

It's interesting that Tyler doesn't explicitly play the price discrimination card. I wrote about the NYT times article on the topic on my blog, and my favorite part was when a Gartner VP was quoted as saying Apple's strategy was something people must have learned in business school. It's just more reason to believe that one economics class could make the world a better (or at least more efficient) place.

“They hyped up the iPhone for six months and built up our expectations, and then they grabbed our extra $200 and ran.

I love that quote. Apple did -nothing-. The hype came from the people that wanted one (such as this guy), the analysts ("apple will sell 5 billion units the first weekend!"), and the press.

[happily paid 600 bucks for the iPhone]

I sure do see how silly and irrational the early adopters are to fail to see both that they got what they initially bargained for and that price drops were to be expected.

But I think it was equally silly and irrational for Apple to fail to understand the psychology of these initial purchasers and that the reaction to the price drop would be angry.

I'm sort of surprised they split the difference at 100 dollars for the credit.

Wow, I've never seen Mr. Cowen lose his cool before.

Whether trendy consumer electronics are priced fairly or whether consumers whine too much, there are more important challenges facing society today.

This hardly seems worth getting emotional about.

Lots of very interesting points.

Still, it all highlights something that baffles me about the economic outlook. I look at the posting and many of the comments and think, "So, y'all are saying that people shouldn't be complaining? Shouldn't be feeling used? Shouldn't be trying to get Apple to make amends?"

That response strikes me as ... I dunno, a little nutty or deluded, or something. You're taking issue with people's feelings, as well as with their emotional experience of the market. What's the point of that?

Are y'all the kind of guy who, when your wife tells you about her feelings, tells her she's wrong? (If so, I wish you well!) Isn't it usually more productive, wiser (and safer) to listen to her with sympathy and interest? So why not observe people's experience (including their emotional experience) of the market with interest and sympathy? They aren't mad at you, after all. And isn't it -- or maybe shouldn't it -- be a role of economics to examine and learn more about people and markets? Which would include their emotional experiences, no?

I agree, that people complaining about the price drop are being a little silly, but it's a completely valid and predictable emotional response.

You guys are basically whining about other people whining.

I live in southwest Florida, and a couple of years back, people were more than happy to buy a house for 200,000 and sell it 3 months later for 250,000 so they could upgrade to an even bigger mortgage and house. I feel about as sorry for those folks as I do for the apple phone buyers who waited in line to shell out $600 a few months back.

I know this is a humorous article, but I do find it discouraging when the perception is that when people fail to conform to economic theory, it's the people who are wrong.

Economics is the study of *human* commerce, so obviously it is economic theory that is (currently) insufficiently subtle to model human economics.

It's also why people are loath to trust economists with setting economic policy. "The policy is perfect. Unfortunately, the electorate is defective." (And then Bryan Caplan wonders why economists don't get the respect they deserve.)

"No more Mr. Nice Guy, no more moderation, no more namby-pamby conciliations." Yeah! Right on! Way to go! I agree, Tyler should be more like Alex!

Let's see, the early adopters got to have bragging rights for some period of time and they also got to use the device as well.

I also fail to see the problem, they paid extra for these services. Buyer's remorse is such a common occurrence that ebay even has rules against people using it as an excuse to renege on purchases.

Tyler isn't upset by the price drop because Tyler bought an electronic gadget which loses absolutely none of its functionality just because other people can now buy it for less. The people who are angry are the people who thought that buying an iPhone would make them hip, cool, and envied. It would make them part of an elite. Apple's drastic price drop, coming so quickly after it skimmed the money from the early adopters, has made the early adopters look foolish rather than hip and cool. The people who were trying to buy social status have actually just lost the product that they paid $600 (or more) to get. They actually have less status now than they had before they bought their iPhones.

In some respects I consider these people to be fools who got what they deserved, but I also think they are right to be angry with Apple. They may be fools, but Apple has consciously cultivated their foolishness for years. Apple's marketing has, for many years, pushed the idea that buying and using Apple products is a symbol of hipness and coolness. "Think different!" "Hi, I'm a young, cool Mac and that guy is a stodgy, unattractive PC." Apple has been pushing pure image advertising of this sort for the entire lifetime of some of these iPhone buyers. I think they do have a right to expect that Apple will not take actions that will strip away the image that they just paid for. Just because the contract is implicit, and conveyed entirely by visual symbolism and background music, doesn't mean that a contract wasn't made.

Again, I think the whiners were foolish to buy into a product mystique cultivated by a corporate marketing department. But I also think that Apple has just betrayed them, and even fools have a right to be angry at betrayal.

But buyer's remorse is interesting, no? Perhaps it's even an interesting economic phenomenon, worth paying attention to, taking into account, and investigating as part of a quest to understand economic behavior and experience.

I confess I don't quite get this shouting-down of people's direct responses ... It's a little like listening to people grumble about how they disliked a movie and then telling them they're wrong, the movie was perfect, they really should grow up and know better. Infuriating as people's responses can be, y'know, it matters a lot less that you think the movie was perfect than how most people responded to it emotionally.

All this said while appreciating and enjoying the humor and brains behind posting and comments ...

If they wait long enough (maybe another month?), they can buy another iPhone with that $100 voucher. ;)

paraphrasing Ashley "I you must keep whining, please try to do it in a rhythm we can dance to"

Reading through these comments it struck me that I am perhaps the only person who bought the iPhone because I just wanted a phone that works. Apparently everyone else bought it to be part of some club...

"people complaining about the price drop are being a little silly, but it's a completely valid and predictable emotional response"

Apple knows this too. They are too smart not to. I think they planned out the discount AND rebate well ahead of the iPhone's release. Not only will most the POed people be appeased by the rebate, but these early adapters will also be carrying around even more new Apple products. I bet most of them will spend more than the $100. Coincidentally, many will be rockin the new iPod ($249) or Nano ($149).

All indications are that Apple is cutting prices because it overestimated the initial demand for its product, not that this was a pre-meditated strategy of price discrimination. Moreover, the early adopters surely understood that they were paying a premium to be the first on their block with an iPhone. They’re just mad because the premium turned out to be much higher than they had any reason to expect given Apple’s previous pricing policies.

I don’t quite understand Tyler’s argument that this will somehow will increase price and wage stickiness. I’m guessing his argument is that future producers of monopoly goods will be more reluctant to lower prices, in order to avoid the public relations fiasco which Apple is currently undergoing. But isn’t it just as likely that future monopolists will try to avoid Apple’s current fate by setting their initial price closer to marginal cost? And wouldn’t that be a good thing?

I can't relate to any of this. After all, I still don't even have a cell phone.
But then, I carry lots of cash around, although all those folks who think that
"everyone takes credit cards now" are also probably the same folks who think
that "housing prices cannot go down." Anyway, Thorstein Veblen taught us all
about this over a century ago. Why are we surprised?

I think Steven is right. This was all part of Apple's master plan. Lower the price. Wait for people to whine. Give them a little $100 gift certificate (it's a gift certificate, not a rebate, remember.). Reinforce in their heads that "Apple is such a great company."

And the people who sold the ipod in ebay 4 o 5 times its price will really complaint?

I don't use any Apple products. They try to make their stuff all ergonomic and user-friendly or whatnot, but it just puts me off, though perhaps if I was not used to Microsoft it would work the other way around. I might try Linux since so many geeks rave about how great it is, but from my limited experience the learning curve seem rather steep. Linux doesn't have any equivalent of the i-[insert here] or Zune/X-Box for fans to rave over, but it has nevertheless managed to develop an elitist subculture that annoys others. BSD doesn't seem to have that, but perhaps the annoying fanbase is just too small for me to have taken notice.

Speaking of smug Mac commercials, get a load of this mocking of Paint. I have to admit I laughed.

Jeff - you can't find a Wii? I see them everywhere. Gamestop has them, for instance, and is selling refurbished ones for $229. If you can resell these things on eBay for $330, then there's some arbitrage opportunities out there, because in Texas, they are not in short supply.

Scott, no they are still scarce here (one state north). I've seen a batch of 5 one time in a Target. Thought about buying it to sell over EBay or even keep, but didn't.

Ah, Tyler, now the truth comes out.

I always suspected that you were really just a shill for corporate interests like Apple.

Now it's just so obvious. You've misled me all these years.

From now on, I'm going to blame the big corporations for all the vicious greed in this world.

Yoshi, you're being disingenuous.

Here's an arguably better phone, on the same network, for 1/3 the price:

Here's another for free:

Just like everyone else you wanted an iPhone. Don't worry, we still love you.

A $200 price drop just two months after introduction is unprecedented, especially by Apple. I think some of the anger is justified.

All this snarking at annoyed iPhone early adopters is missing the real point here. Apple will hard a hard time next time hyping a new product, and getting people to stand in line and generate massive buzz for free.

This has tarnished the Apple brand, and since Apple lives and dies by the brand, it's not good economics on their part. Or even good common sense.

The exact same thing happened with the Motorola Razr when it came out a couple of years ago. First it was a $500 cell phone, then the price dropped to something reasonable, and now you can pick one up for free like the cheap Samsung I have in my pocket. That people are SHOCKED, SHOCKED! means they simply don't pay attention to the cellphone market.

Trea is right about cellphones in general. My $10 refurbished Erickson phone outlasted the $250 motorola KRZR I got as a gift. Also, the microphone and speaker work much better than on the motorola, since they're not encased behind sleek-looking plastic. Oh, also, the battery life is longer, and the keypad is nicer. I don't really miss the camera or the sleek uber-cool look.

"Again, I think the whiners were foolish to buy into a product mystique cultivated by a corporate marketing department"

To the excess at which it was, yes. Same thing with Snakes on a Plane and 300. But at least the IPhone is decent.

But the whining worked, Tyler, and Apple can continue to exploit these people for more and more money because their brand was preserved.

Who's the winner? Apple.

The losers? Hint: "That people are SHOCKED, SHOCKED! means they simply don't pay attention to the cellphone market." A fool and his money are always parted. ;)

I like how Michael Blowhard is whining that people like me are whining about other people whining about the iPhone price drop. I am also amused that he can't accept that our emotions are as completely as valid as the whining early adopters' emotions. I also like how his emotional (and superior economic/human nature) understanding leaves him mystified at people being upset over overprivileged yuppies demanding unearned income from other people.

That conforms to my experience with people who insist that "emotions can't be wrong." What they mean is, "*My* emotions can't be wrong. By not immediately accepting mine, and any accompanying worldviews that inform them, you are denying them and hence feeling a wrong emotion."

Apple is a religion. People did not react to the $600 iPhone. They reacted to what they perceived as a betrayal by their Idol. Me, a cheapo LG and a cheapo PC, sorry, I have a standard main line religion. Don't need Apple.

I told the kids in the office that I'd wait until iPhone-equivalents were free with wireless contracts. You should have seen the outrage! They said "They can't" and I said "actually, I think they will, the relative patents aren't that tight."

I am not a lawyer, and I may have missed news of a really good tight patent, but really I think the dynamic here is that Apple can charge (could charge) $600 where other companies could not. And so they got to lead the technology curve based more on the price they can charge (through brand appeal) than on the unique intellectual property they owned.

So maybe my "free with 2 year contract" phone won't have every UI wrinkle, but it will have the functionality.

If I'm an old guy who got tired of paying early-adopter prices 10 years ago, I can live with that.

(maybe some others just got their early-adopter education)

I understand how Tyler feels in some ways. Why should a person complain simply because another person gets a better deal. It should have no effect on whether the deal you received was good. However, there are at least three answers to this:

First, people are not just concerned about whether they have purchased an item that is worth more to them then the amount of money they have paid, they are interested in getting an item at the best price possible (or a "fair" price). Lets say the iPhone was worth $1000 to a particular customer, she has a consumer surplus of $400 when she purchases the phone of $600. That is a good deal, but if the consume was able to buy it for $400, they would have $200 to purchase other items, increasing their utility to at least $1200.

Second, Apple sells a product, but they also sell an (exclusive) culture. By increasing the number of people who can buy, they reduce that exclusivity. When a person purchased the phone for $600, they expected the price and the level of exclusivity to remain that high for a period of time (at least a year, let's say). When Apple reduces the price, it just reduced the value after the purchase was already made.

Third, Apple breached a custom that has value: selling a product at the same price to each consumer. It might be efficient for many companies to sell products at different prices to different consumers in order to extract the maximum revenue. And this could benefit most people by encouraging the production of valuable products, increasing the number of people who will want to purchase an item, and lower prices for many consumers. However, variable prices come with their own costs. When people know prices might change it adds an incentive to try to get the lowest price possible. This could encourage people to delay purchases, to invest time into investigating price changes, and generally increase transaction cost. Ever know someone who spent every day checking flight information looking for price drops? Ever tried to find out the real price of a car? Getting a good deal can be a pain in the ass. Having a norm of giving everyone the same price reduces these transaction costs.

From the GMU web site:

The Koch Foundation’s generosity includes assistance in the recruitment in 2001 of Vernon Smith and his team of six distinguished economics professors to Mason. Smith, now a Nobel laureate, is a leader in the growing field of experimental economics. At George Mason, undergraduate and graduate students across related disciplines evaluate the performance and function of real-world markets and institutions.

Bringing in seven people as a team is not insignificant as the tone of the press release rightly indicates. The thing about early money is that it determines the course that is followed subsequently.

I suppose that arguing with shills and their adherents is pointless, but denying the power of donors who give money with strings attached is disingenuous or naive.

It is also impossible to know how directly some of the biggest supporters of this site benefit from the arrangement since they chose to hide behind screen names.

Let's just say that the number scholars who push the libertarian philosophy and who aren't tied to the core of big conservative donors is extremely small. In most advanced countries they don't get any notice at all. If the libertarian ideas are so important than why is it a creature of just the US and the wealthy donors who make it possible?

Resent Coase (72), induce wage and price stickiness and widen the Okun gap!?

Give me a break.

Dude. It was a joke. He was teasing.

Bringing in seven people as a team is not insignificant as the tone of the press release rightly indicates. The thing about early money is that it determines the course that is followed subsequently.
they all left, right?

Steve Miller makes my day with the post above.

On a related note, I don't think rdf's point is completely invalid. Our hosts are indirect beneficiaries of a significant largesse. But brainwashing is the objective then will it work? It hasn't for me. I come to MR not for it's ideological musings but for interesting everyday stuff. I think most visitors to MR are too smart to be brainwashed anyway. They can spot an obvious trick when they see one. Also, the vast majority of visitors here are pre-selected by their ideological leanings.

Apple's decision is a very good business decision.

In the future, Apple will release more products. Everybody realises that these products will follow appromiately the same price pattern. Now there is some number of people who may want to wait for the first price reduction before buying the technology. If Apple does not get enough early adopters and enough people wait for the price to fall, the product will not be a success.

I would guess that Apple would have to make this rebate a tradition for every new product.

I claim that a core group of super wealthy has an undue influence on policy and political philosophy in the US.
Do you believe there is such a thing as "due influence"?

It is natural that most Americans, having grown up with the concepts of democracy and the founding fathers
What in Sam Hill are you talking about? The founding fathers didn't care for democracy, that's why the majority of the population was disenfranchised when they founded the country. You had to be a landowning white male to vote.

As for academic departments it seems contrary to the goals of a university that a department would have a specific philosophical outlook. When one says U of Chicago one has a pretty clear idea of what sort of material will come out of their economics department. If the goals of a university are to allow students to discover the "truth" then built in prejudice is contradictory. This is especially true of a public institution.
A lot of Chicago profs have won the highest awards in economics. These guys aren't hacks. Same with Vernon Smith and Buchanan from GMU.

Obviously there are schools that are set up for the opposite purpose, there is a new book out about Patrick Henry University which is specifically aimed at turning out Christian, conservative activists.
There's a really good Gene Expression post about that I think you'd be interested in.

Ideologically inspired "research" is not only bad science, but undermines the credibility of the entire profession, whether economics or English lit criticism.
I don't know how to break this to you rdf, but a huge number of people have considered academia to be ideologically tainted for some time. The most vocal of those people is David Horowitz, whose (whenever someone insists LVMI/LRC should be shunned by conservatives they cite this page) reminds me of your own page detailing the backing of libertarians. I don't go much for conspiracy theories, so look at polls of academics, which you can find a collection of here. Libertarians are greatly over-represented in universities: there are about as many of them as there are conservatives (who are greatly underrepresented, for reasons of self-selection I believe). Both groups are tiny in comparison to the left (whether progressive or establishment).

If you want to claim that libertarians have hijacked our democracy, I think you need to explain why Ron Paul votes alone so often.

---Why are you so mad that people don't behave according to economic theory? Since when did theory make the leap to prescription?

I found that most game theory I was taught in grad econ courses was similar. The profs were always so angry when people didn't play the game correctly, constantly confounding them.

People don't NEED the iPhone, they need something to show off to others and carry proudly on their hips. These people see the latest thing on the market and automatically purchase it at retail price knowig that in six months the price will drop dramatically and the phone will ultimately have more attractions and work more efficiently. The surplus of iPhones is now at a high demand(just coming out into stores) so the producers released a certain amount while customers waited and paid to be in long lines for theis over priced product.The total bebefit for Apple is a great number ranging high above the cost to actually make the product. After hearing complaints about the iPhone and how it doesn't work like it is supposed to and the sevice it terrible I wonder why people pay the higest amount for something they don't need when the quality and price will both be better in a matter of months?

Chelsea Meffert

I think that the people who bought the very first Iphones should have realized that the price would eventually drop as it does with every product that comes on the market. Take for example the Ps2 when it came out was 300 dollars and now you can get one for $150. They released the PS3 and the priced dropped on the PS2 so you are inclined to assume that a company such as apple is already developing something newer and better than the Iphone. I never wanted an Iphone because I already have an Ipod and a good cell phone. Apple did the smart thing from and economics stand as well. They knew that people would flock to buy the Iphone because it was a new product and they hyped it up really well. After the product had been on the market for a couple of months they reduced the price and are selling more now and the people who bought the first Iphones are getting angry because they can't use the "haha I have and Iphone and you don't" anymore because it is now cheaper so more people have them.

First of all, you are an idiot for buying any sort of new technology when it is first introduced to the consumers. Are you two years old? Every year, either around December or June there is some new and amazing technological gadget that comes out. Is it ever cheap, is it ever avaliable to all that want it? No, it is not. There is a reason for this, the reason being that the developers know that there is always going to be that must have consumer who will pay anything to be the only one on the block with a gadget. Well all I can say is you are a dumbass. If you had just waited a few months and not have been a greedy bastard, the must have demand for the product would go down, more supplies would be made and the price is going to go down. So quit your bitching and complaining.

Tyler, your post was one funny bit.

Even funnier was how seriously people take this iPhone stuff. Lucky for me we don't even have them in Australia yet.

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All the major functions perform fully as advertised. The mini-iTunes store is a lovely touch, though I don't find myself using it much. It almost feels like a symbolic gesture, pointing toward some ecstatic future when iPods will be wholly emancipated from servitude to the PC mothership. Browsing and photo management are gorgeous and indistinguishable from the iPhone experience. Ditto video and audio playback. I don't see the "cover flow" interface as a game-changer, exactly, but I'm sure getting used to it. Is the click wheel done for? I wonder if this time next year they're even going to be manufacturing non-touch iPods anymore.

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