America's Future Foundation

But if you buy them at Best Buy or other brick and mortar stores, you’re sure to get screwed, as Alex Tabarrok recently discovered:

Why don’t any stores stock cheap HDMI cable?  I knew cables were a ripoff yet I could not find reasonably priced cables at Best Buy, Radio Shack, Target or even Wal-Mart.  Ordinarily, we would expect competition to push prices down but in this case it seem as if the mere existence of Monster is anchoring high prices everywhere but online.

I’ve often wondered about this myself. HDMI cables aren’t inherently expensive; you can literally buy them for pennies (plus shipping) at Amazon. And since HDMI is proprietary format owned by Intel, certain requirements have to be met, thus guaranteeing that all the cables are essentially the same. Yet if you go to Best Buy and attempt to buy a HDMI cable to complement your PS3 or Blu-ray player you will pay, minimum, $40. How can Best Buy get away with this? I think the answer is two-fold. On the one hand you have people who don’t know a ton about the technology and don’t realize they’re being taken for a ride. Ignorance is a large factor. But the other factor is the “gotta have it now” phenomenon. Let’s say you go into Best Buy knowing that Monster Cables (the uber-expensive brand favored by Best Buy) are a ripoff: what you don’t know until you get there is that Best Buy only stocks them. So you’re faced with a choice: I can get the ridiculously expensive cables now while I’m purchasing my HDTV/Blu-ray player/PS3 or wait an extra week for the cables to arrive from Amazon, thus delaying my setup and enjoyment of this fine home entertainment system. A large number of people must go for the immediate wish fulfillment instead of the more financially prudent route. Best Buy realizes this and mercilessly capitalizes on it.

And in this little scenario we see exactly what’s wrong with the American consumer. Why wait a few days when you can blow four times as much money for the same exact product in order to get it instantly? Why wait to get something you can’t afford at the moment when you can put it on a high interest credit card? Why wait to get a nice house via a reasonable down payment when you can take out a subprime mortgage that you won’t be able to afford in five years? You want to know what’s wrong with the American economy? Just look at Best Buy’s cable aisle.

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