<Zelig> It's not really helpful if people are replacing your old model if you're making no profit on it.
<Mise> where am i suggesting that there is no margin on phones?
<Mise> to be clear, i'm not
<Mise> i'm saying that you will always sell more phones if you price lower
<Mise> so the idea that the price advantage is the same if you price at $500 vs $300 vs 1 dollar isn't true
<Zelig> I'm saying there's very little margin on the Nexus.
<Zelig> So if you lower the price by $15 you need to sell twice as many phones.
<Mise> yes, so my point is, why does google not want to sell as many phones in the EU than the US?
<Zelig> Presumably because the demand for phones is inelastic enough that they don't sell many fewer phones at 15% more cost.
<Mise> i agree that the margin on the nexus is low, but your arguments are just telling me that google should be pricing higher in the US than they currently are by $15, because they will make more profit
<Mise> yeah, so... why price so low in the US? they should sell for 15% more and make more profit in total
<Mise> that seems to be what your arguments are driving towards
<Zelig> Yeah, but there's more competition and contracts in the US
<Mise> i dont buy that as a plausible argument, because what you're telling me is that they will need to sell twice as many phones in the US than the EU
<Zelig> So a Nexus for $350 vs $200 for a Galaxy on contract is 50% more expensive to the consumer than a Nexus for $300.
<Mise> but that same situation exists in the EU
<Mise> i mean, the difference in competition isn't enormous: we have plenty of competition here
<Mise> and the difference in contracts isn't enormous: the vast majority of people in the EU are on contracts
<Zelig> Yeah, but they're more expensive too.
<Mise> eh?
<Zelig> The competition is more expensive
<Mise> so?
<Zelig> Which seems to me a very clear reason for justifying higher prices.
<Mise> it isn't a clear reason at all, it's only clear if you have some naive beliefs about the market for phones, i.e. that it is fixed
<Mise> a fixed size
<Zelig> I feel like I addressed this already
<Mise> you haven't at all
<Zelig> [14:30] <@Zelig> Presumably because the demand for phones is inelastic enough that they don't sell many fewer phones at 15% more cost.
<Mise> you haven't addressed why that is so massively different in the EU than the US
<Zelig> If they lower the price by 15% and sell 50 extra phones in the entire UK
<Mise> so why do they do it in america then?
<Zelig> Vs if they raise the price in the US by 15% and lose 50k sales because people buy different phones instead.
<Mise> competition and contracts aren't particularly different at all
<Mise> except the competition in the US is still a long way more expensive!
<Mise> i mean the nexus is like $150 cheaper than any comparable phone
<Zelig> On-contract is competition
<Mise> and on contract, the situation is identical in the EU to the US: you have a choice of paying $400 for a nexus off contract or $200 on contract for a S4
<Mise> do you think we don't have contracts in the EU?
<Mise> so drop the price to $350 and the situation is identical to the US: $350 for a off contract nexus vs $200 for an on contract S4
<Zelig> That doesn't make my numbers invalid
<Zelig> If there's higher demand for off-contract phones in the EU, you can still gain 50 sales by dropping from $400 to $350 vs losing 50k sales in the US if you were to raise from $350 to $400
<Mise> that doesn't make sense
<Mise> explain where the 50 and 50k come from
<Zelig> They're just numbers I made up, but we don't have access to whatever numbers Google used, so it's plausible that they had some pair of numbers for that situation that justifies the price difference.
<Mise> i don't think it's plausible at all
<Mise> because i don't see a significant difference between the EU and US
<Mise> you said "If there's higher demand for off-contract phones in the EU", but (a) i dont see what that has to do with anything, and (b) i don't see how there is such a vast difference in the number of contract phones in the EU vs US
<Mise> i mean the market is mostly for really dirt cheap phones like nokias
<Mise> dumbphones and crappy 3" HTCs
<Mise> like i said, the vast majority are on contracts anyway, so i just don't see how there's any difference
<Mise> everything you're saying about why google priced the EU, e.g. little margin so needs 2x sales, can be said for the US
<Mise> certainly the vast majority of people who have phones comparable to the nexus are currently on contracts
<Mise> but in the EU, there are a lot more people who are paying like $100-200 for an off contract phone, who might be willing to buy a phone for $350
<Mise> so i would not expect google to price higher in the EU than the US, given that there is actually more potential to sell higher volumes at $350 in the EU than in the US
<Mise> to sell the higher volumes necessary to make up the smaller margin
<Zelig> Even if you eliminate everyone on contract, as they're the same price
<Zelig> I think it's still plausible that they lose more sales in the US (at $400) to people going with more expensive phones than they gain in the UK (at $350) from people upgrading from feature phones.
<Mise> why?
<Mise> why should the two markets be so different?
<Mise> you say that the market for feature phones => nexus is negligible, but then, what's the difference btwn the US and EU?
<Mise> i mean 15% is a massive difference when it comes to pricing
<Mise> and like you said, the margins in the US are razor thin
<Mise> you think that they will lose 50% of their sales if they price at $400 in the US?
<Zelig> Because the G2 is still more expensive in the UK off-contract. You might get 50 extra people in either the US or UK at $350 instead of $400, but at $400 in the US you get 500 fewer people who are willing to pay an extra $300 for the G2, and in the UK you get only 50 fewer people who are willing to pay the extra $400 for the G2.
<Mise> Zelig i simply don't find that plausible, mostly because of the margin argument you made earlier
<Mise> you're saying that they need twice as many sales
<Mise> i dont find it plausible that pricing a full $300 lower than their nearest competitor would reduce sales by 50% vs pricing $350 lower than their nearest competitor
<Mise> i mean that's a really weird looking demand curve
<Mise> seems to drop off a cliff at any price higher than $350
<Mise> but is pretty much level at any price lower than $350
<Zelig> Well they're pretty clearly not going for profit maximizing, I assume they attach various values to which competitor they steal sales from
<Zelig> I'll concede that you can narrow the dichotomy down to "the demand curve is really weird" or "google is incompetent at pricing"
