Next Generation Diffusion
Source: https://www.videogameschronicle.com/news/ps5-and-xbox-series-scalpers-have-reportedly-made-over-28m-on-ebay/
With next generation gaming consoles being released last month, people have been scrambling to try and get a console before the holidays due to their low quantity in stores. This may be due to scalpers as Tom Ivan talks about in “PS5 and Xbox Series Scalpers have Reportedly made over $28m on eBay.” Through an analysis from data engineer Michael Driscoll, a scalper software was created to analyze how many next generation consoles were sold by scalpers on eBay alone. Through his analysis, it was shown that over 60,000 have been sold by scalpers on eBay with Xbox consoles averaging sales about 150% their retail price and Playstations averaging selling prices 2 times their original pricing. With Playstations making up $19 million and Xboxs making up $9 million, scalpers were able to secure these consoles during online restocks due to software they created to automatically monitor and purchase these consoles when they went live. With stocks for next generation consoles already being available in low quantities, major European retailers are not expecting to have these consoles back in stock until 2021 and many American retailers cannot guarantee shipments to customers before the holiday season.
Looking at next generation consoles and last generation consoles, it can be broken up into a larger problem of technological diffusion. This is people’s ability to switch to one technology over one they already have based on a threshold of friends that have adopted the technology. Looking at these consoles, the Playstation 5 (PS5) is technology A, the Xbox is technology B, the PS4 is C and the Xbox One is technology D. In this scenario, no one with technology D is going to adopt technology C and no one with technology C is going to switch to technology D. Because there has been such an issue with scalpers in next generation consoles, everyone has a much lower threshold for adopting either technology. While in the past people with technology C would be more interested in technology A, with the same upgrade logic applying to Xbox, these consoles are so hard to find at retail value that people are willing to purchase either console they are able to get their hands on before the holiday season. Because everyone has such a low threshold, the density of a cluster is not going to be super relevant because 1 minus the threshold for most people will be larger than the density of their cluster. This means that if anyone can purchase a next generation console in their friend group, there is a high chance of a cascade effect for either next generation console if one initial person gets one in their cluster.
On top of generally thresholds, everyone who initially adopts a new technology have an individual threshold needed to be met to adopt technology A or B. Having the old generation Playstation of Xbox may influence an individual with no connections to anyone with a next generation console to purchase the next generation of the same brand. With each of these next generation consoles having backwards compatibility, the ability to play games from the last generation console, there are some who have a lower threshold for the next generation version of the console they already have. Another factor that is associated with initial adoption for individuals who do not have a cluster with the new technology is there availability even with the scalper issue. A lot of major retailers have created systems in which scalpers are unable to buy large amounts of stock with premade software. Sony, the creator of Playstation, has had daily queues for individuals to try and purchase the PS5 which is one reason some people will have a lower threshold for initial adoption of the PS5. With stock being a huge issue, the overall availability outside of scalpers upscaling the price is a huge factor for initial adoption before having it spread through a cluster.
For a cluster to even start, an individual must have their own individual threshold met by either of the next generation consoles. This is difficult due to scalpers taking and reselling the consoles at higher prices. But as seen by the scalpers making a lot of profit, peoples own individual thresholds are a lot higher than the original retail prices. With next generation consoles being released during the holiday season, the threshold of adoption becomes higher since parents want to make their kids happy. Because parents have a higher price, they are willing to pay for the next generation consoles, scalpers are able to make a lot of money off the consoles. While this allows individuals to adopt a new technology, it becomes harder for the cluster to adopt the technology because some others in the cluster may not have the ability to buy the next generation consoles for a higher price and they may not be able to buy one when they restock due to the extremely high demand.