Path: utzoo!utgpu!jarvis.csri.toronto.edu!mailrus!tut.cis.ohio-state.edu!bloom-beacon!mit-eddie!apollo!mike
From: mike@apollo.COM (Michael Schloss)
Newsgroups: comp.misc
Subject: Re: Ethics of crippler circuitry
Message-ID: <41cf7d93.ccb2@apollo.COM>
Date: 3 Mar 89 23:22:00 GMT
References: <176@ucl-cs.UUCP> <1989Mar2.193443.17196@sq.com>
Reply-To: mike@apollo.COM (Michael Schloss)
Organization: Apollo Computer, Chelmsford, MA
Lines: 65

In article <1989Mar2.193443.17196@sq.com> msb@sq.com (Mark Brader) writes:
>> Do ethics really enter into this?  Nobody actually gets stung,
>> and the only reason people feel dissatisfied seems to be some
>> kind of resentment because "I could have done that".
>
>If the fast version of the machine sells for $B (B for Big Number), and
>the crippled version sells for $S, and the crippling really is done
>simply by adding something (something non-functional and of negligible
>cost) to the fast version, then the manufacturer must be making $(B-X)
>profit on each fast machine and $(S-X) on each crippled one, for some $X.
>Unless they're engaging on "loss leader" or similar strategies, both numbers
>are positive.
>
>This means that the vendor could have chosen to sell the fast machines
>at price $S and still made a profit.  Instead they elected to receive
>a profit larger by a substantial amount, namely $(B-S).  Now posit a
>second company selling a virtually identical machine but selling the
>fast version for $S, with comparable marketing and the like.  Result:
>they get all the business.  But what if the second company also decides
>to take the crippler approach?  Then each company, maybe, gets half the
>business and greater total profit.
>
>The ethical issue arises in two ways:  if several companies are in
>the same market and many or all of them are using cripplers, there is
>an appearance of price-fixing.  And if only one company is in a market
>and is using a crippler, they appear to be taking advantage of a type
>of monopoly.  But for these purposes "a market" may mean one segment of a
>highly segmented market; computers of different brands sometimes don't
>really compete against each other; so these situations do happen.  Now, is
>price-fixing ethical?  Is this price-fixing?  There's your ethical question.
>
>The resentment arises from the perception that this may be happening.
>It also arises from the fact that the existence of the crippler circuit
>makes the buyer feel that the profit increase of $(B-S) is *unreasonable*;
>after all, the vendor is earning that increase for nothing.  So the buyer
>feels taken advantage of.  Probably if the vendor sold the fast machine
>only, the price would be between $B and $S; but the buyer sees only that the
>vendor could have sold for $S and still made a profit, and resents that.
>
>I have tried to present this neutrally, but my emotion is with the buyer.
>
>Mark Brader, SoftQuad Inc., Toronto			It's all Henry's fault.
>utzoo!sq!msb, msb@sq.com				    -- Geoff Collyer

You may be missing a point here.  Let's say that each incremental machine costs $X.
Let's also say that R&D costs for the machine are 10000 * $X.  The company wants
to sell as many of these as possible to recoup their R&D costs and make a profit.
They sell the machines for $Y where Y >> X.  In the course of their sales and
marketing research they have found that there are a lot of people out there who
would like to buy the machine but can't afford $Y.  If the market is isolated
enough they may sell some at a cost of $(X+Z) where Z is a relatively small markup.
An example of this is a manufacturer giving a big discount to universities.  As
long as it doesn't affect sales for $Y there is no harm done.  If the market isn't
isolated enough then they may resort to one or more "crippled" versions.  They
aren't trying to cheat the customer, they are just trying to sell more machines
without hurting their regular ($X) sales.  Other businesses do this too.  Ever
seen a bookstore selling paperbacks with the cover torn off?  Or record stores
selling "cut-outs", albums with one corner cut off of the jacket.  A better
example would be the clothing stores that buy from manufactures that have stamped
"IRREGULAR" on the inside of a pair of pants, or slash the label, or cut the little
gator off.  Hope this clears things up.

Mike Schloss
mike@apollo.com
{decvax,mit-erl,yale}!apollo!mike