Gamers looking to get their hands on the new PlayStation 5 console will be disappointed if they try to find one at a retail store. Within days of its release, Sony CEO reported that every single console produced had been sold. This does not mean, however, that there are no PlayStation 5s for sale, just that consumers now will have to purchase them from the secondary market. Why? Unlike previous console releases, where dedicated fans could camp outside retail stores to ensure their place in line to get the console, the PS5 was released almost entirely through online sales. This opened the door for resale businesses to develop bots to purchase as many units online as they could before they were gone. In the first few days after PS5 was released one resale group boasted that they had a larger inventory than most retailers.
Even before its release, PS5 consoles were selling for as much as $800, more than 50 percent over their retail price. An online resale platform reported selling more than 1,000 consoles on the first day after release. As the holidays approach it is likely that prices will continue to rise. One reseller has listed a PS5 console for $32,000. Whether anyone is willing to pay that price remains to be seen.
Discussion/Questions:
- Sketch a supply and demand graph with perfectly inelastic supply and inelastic demand that depicts the market scenario described above.
- Undoubtedly, Sony knew that demand would be high and the MSRP would result in a shortage. Why might they be hesitant to raise their price despite this fact?
- When Sony releases a second round of PS5s in early 2021, it is unlikely that it will result in the same type of shortage and high prices in the secondary market. What does that say about the relative elasticity of demand between those who buy the PS5 now and those who wait until 2021? What factors might contribute to that difference?
Sources: New York Post: Sony CEO on PlayStation 5: ‘Absolutely everything is sold’. Business Insider: One reseller group snagged nearly 3,500 PlayStation 5 consoles, and the resale market might be the only place to score one after it sold out everywhere online. Business Insider: The PlayStation 5 is already reselling for nearly $800 — and it hasn’t even launched yet. CBS News: Will there be another PlayStation 5 and Xbox restock at retailers this year? Photo by Harpal Singh on Unsplash.