Thursday, January 05, 2012

Weird Price Discrimination

So we were in Dick Smith (electronics store) about to buy something that costs $A250. Snork Maiden asked the cashier if any deals were available. He looked at his computer for a while and said - I can give you a two year extended warranty and reduce the price to $A225 - the price of the item was now only $A170 and the warranty $A55. This makes no economic sense to me at all. How can it make sense for them to give away more stuff for less money? I can understand where he'd reduce the price if we asked or throw in the warranty for free, but why do both? Anyway, of course I agreed to that deal.


Topdown said...

I think the salesperson probably got greater commission for the warranty than the product?

Isn't there normally a cooling off period on warranties? if you don't need it then cancel it and keep the item :)
Aussie consumer laws have recently been strengthened I think, meaning most warranties are implicit?

mOOm said...

You are right about the cooling off period. But how does the company win from letting him cut the price by $80 if he sells a warranty?

Rafi (S) said...

Maybe the warranty is really so cheap that they throw it in basically for free except for the suckers who pay for it.

mOOm said...

It probably is cheap because anything that will go wrong with the product that is covered in the warranty will likely happen in the first year. But still..