Matching Markets, the new iPhones, and iOS 12
https://www.nytimes.com/2018/10/23/technology/personaltech/apple-iphone-xr-review.html
These articles discuss the latest products that Apple has come out with: the iPhone XS, the iPhone XR, and iOS 12. The iPhone XS, Apple’s latest, most premium phone, goes for $1,000 and up and comes with all the bells and whistles, such as a fancy screen and a double lens camera system. The iPhone XR is the “budget” version of the XS which doesn’t have as nice of a screen, only has a single lens camera, and is a bit bulkier, but is otherwise very similar to the XS. It goes for $750 which is quite a bit less than the premium XS, given how similar they actually are. The last product that Apple released is not a new piece of hardware but rather a new piece of software, which is iOS 12, the latest version of the operating system that runs on all iPhones. This new operating system was specifically designed to improve performance on older models of the iPhone up to the 2013 model, and of course, it’s free to download for anyone who owns an iPhone. These 3 different products are targeted towards different kinds of iPhone users and reflect Apple’s strategy to get iPhones into the hands of as many people as possible and keep those people coming back for more.
Considering these 3 different products and the 3 different demographics that they are targeted at, we can construct a very rough matching market. The first demographic to consider is an average working-class person. Let’s say he purchased an iPhone 3 years ago and has been using it ever since. He has noticed that his phone has been slowing down a bit recently, but not enough to justify spending a large amount of money on a new phone. The second demographic to consider is someone who is looking to buy a new iPhone for whatever reason. Maybe Android wasn’t right for him, or maybe his old iPhone’s battery life is too short or it’s getting too slow to use. He wants a quality phone that will last him for a long time, but he doesn’t care too much for special features and he doesn’t want to break the bank either. The third demographic is an iPhone enthusiast who has been saving up for the next model ever since the iPhone X came out.
Now let’s guess the relative values each demographic has for each of the 3 products. The first demographic probably values iOS 12 the most since he isn’t very interested in buying a new iPhone (value will be small and cost will be large for a new phone) and the cost of iOS 12 is nothing. The second demographic probably values the iPhone XR the most because he wants a new phone but doesn’t wasn’t to pay too much for extra features. The third demographic probably values the iPhone XS the most because of his love for the iPhone and his desire to own the latest, most premium version. In this case it is pretty easy to figure out the perfect matching: each person values a different product the most, so we can just assign them that product. The flaws of this model are that not everyone can be evenly categorized into 3 different groups and there are many other factors that could go into a person’s decision to buy a phone or not.