Apple’s iPhone X may be crossing a pricing threshold
nytimes.com/2017/09/10/technology/apple-iphone-price.html
This article discusses how the new iPhone X starts out at $1000 dollars, which is way beyond the previous price of around $769 for the iPhone 7 Plus. As concerning as this may seem, according to investors, Apple has been doing very well (as its stock rises) and they believe that regardless, people will buy the phone as it moves into luxury territory. However, some other concerns arise in countries like China and Brazil, where a majority of smartphone buyers do not have the kinds of funds to purchase this phone. When interviewed, a resident of Rio told the NY Times that price is the most important factor her. Yet still, Apple believes that there are enough wealthy buyers to make profits worth it in the country. Apple hopes that by showing the people a brand new looking phone, instead of releasing what seems like repeats of previous phones, more people will be interested regardless of price.
Let’s jump into how this applies to what we’ve been learning in Networks. In class, we learned how people have an intrinsic value on a good. However, that value is also heavily influenced by how many other people around also use that good, and what they say about it. If we model these factors, we find out that there is a threshold, where if a certain percentage of the population does not use the product, it will spiral out of control and go to 0% of the population owns the product. This means that Apple is nearly 100% certain that at a pricing of $1000, the expected fraction of the population that uses the product is above the “tipping point” as we call it. However, perhaps they neglected factors such as social media influencing people’s thinking. I am not an economist, but if I were Apple, I would be cautious because starting with that high price may get a lot of negative press, driving the actual percent of users down, bringing it below the threshold. However, I’m sure there are enough smart people at Apple and they decided that no matter what, this would be okay.