Friday, December 31, 2010

iPad Pricing

Apple charges AUD 130 more for the 32GB iPad than for the 16GB iPad. Yet a 16GB flash memory card can be bought for as little as AUD45. The premium in the US is USD 100. Interestingly, the premium for a 64GB iPad relative to a 32GB iPad is also AUD 130/USD 100. The lowest price I found for a 32GB flash drive was AUD 89. It looks like Apple makes much more profit off the higher memory versions than the base model and that this is a form of price discrimination which is enabled by it not being possible to add flash memory oneself to the iPad. I think this can be analyzed as a case of "tying". Apple requires that you buy the extra memory from it, much as the movie theatre bans food apart from that they sell themselves. This would be a good case study or exercise for a microeconomics course.

More on iPad pricing from the Economist.

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