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>Artificially limiting what you can and cannot do on your hardware is a bad precedent. Everything does it - from Intel chips being binned by performance, Windo

>Artificially limiting what you can and cannot do on your hardware is a bad precedent. Everything does it - from Intel chips being binned by performance, Windows versions and # of CPUs, and pretty much any big software products. Another way to see it is: it costs X to develop a line, and a vendor can charge everyone the same, no matter how they use it, or they can design and partition the line so users with different needs pay more or less. So, for example, a home PC with 8 cores is not paying for software that handles 128 cores, and those needing 128 core software pay more. When Intel does a run of CPUs, and tests them, and finds some can run at 4 GHz, and others only at 3 GHz, then they can either throw out the 3GHz ones and charge everyone much, much more for the single sku, or they can partition the same chip into bins for different prices, effectively lowering the chip cost for every single sku. The alternative to pricing in tiers is to charge the 128 core user less, and the 8 core user more, then the majority of users get charged more for things they will never use. Or only sell the top of the top of the chip yield, making the per unit cost astronomical, since now your yields dropped through the floor. Personally, I like market segmentation, since it allows me to only pay for the things I want, while others can buy the things they want. I prefer not being charged to support development of things I don't want or need. And in some cases it lowers the cost for everyone.

wtallis 6y ago
Binning chips for yield is different from artificially crippling chips. There's nothing wrong with taking an 8-core CPU with a defect in one core and selling it as a 6-core part, or underclocking it until all 8 cores are stable and selling it as a slower part. The odious part happens when fab defect rates drop and yield improves, so basically all the dies can function as 8-core chips. When that happens, Intel et al. start disabling perfectly functional cores to artificially constrain the supply of high-end parts. That's a pretty clear cut market failure that's only possible because the barriers to entry are so high. The most extreme instance of this that I'm aware of was when Intel sold a ~$50 piece of software that would unlock the rest of the L2 cache on a specific low-end processor model. They didn't say it might work on your chip; every instance of that model had apparently passed QA with the full cache enabled but shipped with a fourth of it (IIRC) disabled. So Intel wasn't saving any money or harvesting any otherwise-unusable parts with that model. They were just price fixing. Product segmentation for software is also a different issue, because all the scarcity is artificial to begin with, with no natural underlying supply curves because there's no marginal cost to making another copy.
- ChrisLomont 6y ago
  > there's no marginal cost to making another copy Marginal cost is not the only cost. It's disingenuous to treat it as such. It's also incorrect - making a copy for someone to access is most certainly not free. And the economics is sound - partitioning markets allows sales at lower prices to many purchasers. There's simply no way around this, no matter how you feel about it. >That's a pretty clear cut market failure No, the same economics above apply - partitioning the market lets those less needs obtain product at a lower cost than those with more needs, no matter how the device/software is created. Market segmentation replaces a single, ham handed consumer and producer surplus with a multi level one, allowing each side to capture more of the surplus for their benefit, leaving less of the summed surplus on the table. Not every purchaser has the same surplus to trade. By splitting the market some purchasers that would not otherwise buy are now willing and able to do so, and the tighter or possible non-existent margins there are offset by selling to those accepting higher price points, almost always offset by extra capability. And no matter how you slice it, commodity chips and software are so incredibly cheap compared to the value they provide it's hard to claim these prices are somehow not reasonable. For less than a week's pay I can purchase an incredible set of tools that I can then turn into orders of magnitude more value for me. Pretty much any professional making a living based on computers is in the same position.
  - wtallis 6y ago
    > Marginal cost is not the only cost. It's disingenuous to treat it as such. Well, it's a good thing I didn't do that. I just said that the lack of any real marginal cost means that artificial market segmentation for software should be analyzed separately from artificial market segmentation for physical goods. And only one of those two analyses is relevant to this thread. The software stuff you brought up is a red herring.
    - ChrisLomont 6y ago
      >that artificial market segmentation for software should be analyzed separately from artificial market segmentation for physical goods This is akin to economic voodoo. There is no reason to do anything different for either one - they are products, customers buy them. Once you want this artificial split, I guess based on your (incorrect) claim that there is no marginal cost (original claim) or lack of any real marginal cost (backpedaled claim) as the deciding factor, then when do you start to add a continuum of how you analyze based on a continuum of costs? If there is a marginal cost 3/4 between your two cases, do we now need to interpolate your forms of analysis? All because you personally don't like how markets work? Or why not simply use the same method, standard economics, to analyze them? And realize all these products have the same benefits to consumers via varied pricing? >The software stuff you brought up is a red herring. No, it shows how markets work. That you move your goalposts in the middle of a thread is the fallacious reasoning. And you've failed to address that segmentation like this allows people to buy that could not have otherwise. Do you dispute that segmentation allows cheaper pricing for some consumers, and in some products, all consumers? Are you arguing for higher prices or just ignoring this empirical fact?

wtallis 6y ago

Binning chips for yield is different from artificially crippling chips. There's nothing wrong with taking an 8-core CPU with a defect in one core and selling it as a 6-core part, or underclocking it until all 8 cores are stable and selling it as a slower part. The odious part happens when fab defect rates drop and yield improves, so basically all the dies can function as 8-core chips. When that happens, Intel et al. start disabling perfectly functional cores to artificially constrain the supply of high-end parts. That's a pretty clear cut market failure that's only possible because the barriers to entry are so high. The most extreme instance of this that I'm aware of was when Intel sold a ~$50 piece of software that would unlock the rest of the L2 cache on a specific low-end processor model. They didn't say it might work on your chip; every instance of that model had apparently passed QA with the full cache enabled but shipped with a fourth of it (IIRC) disabled. So Intel wasn't saving any money or harvesting any otherwise-unusable parts with that model. They were just price fixing. Product segmentation for software is also a different issue, because all the scarcity is artificial to begin with, with no natural underlying supply curves because there's no marginal cost to making another copy.

ChrisLomont 6y ago
> there's no marginal cost to making another copy Marginal cost is not the only cost. It's disingenuous to treat it as such. It's also incorrect - making a copy for someone to access is most certainly not free. And the economics is sound - partitioning markets allows sales at lower prices to many purchasers. There's simply no way around this, no matter how you feel about it. >That's a pretty clear cut market failure No, the same economics above apply - partitioning the market lets those less needs obtain product at a lower cost than those with more needs, no matter how the device/software is created. Market segmentation replaces a single, ham handed consumer and producer surplus with a multi level one, allowing each side to capture more of the surplus for their benefit, leaving less of the summed surplus on the table. Not every purchaser has the same surplus to trade. By splitting the market some purchasers that would not otherwise buy are now willing and able to do so, and the tighter or possible non-existent margins there are offset by selling to those accepting higher price points, almost always offset by extra capability. And no matter how you slice it, commodity chips and software are so incredibly cheap compared to the value they provide it's hard to claim these prices are somehow not reasonable. For less than a week's pay I can purchase an incredible set of tools that I can then turn into orders of magnitude more value for me. Pretty much any professional making a living based on computers is in the same position.
- wtallis 6y ago
  > Marginal cost is not the only cost. It's disingenuous to treat it as such. Well, it's a good thing I didn't do that. I just said that the lack of any real marginal cost means that artificial market segmentation for software should be analyzed separately from artificial market segmentation for physical goods. And only one of those two analyses is relevant to this thread. The software stuff you brought up is a red herring.
  - ChrisLomont 6y ago
    >that artificial market segmentation for software should be analyzed separately from artificial market segmentation for physical goods This is akin to economic voodoo. There is no reason to do anything different for either one - they are products, customers buy them. Once you want this artificial split, I guess based on your (incorrect) claim that there is no marginal cost (original claim) or lack of any real marginal cost (backpedaled claim) as the deciding factor, then when do you start to add a continuum of how you analyze based on a continuum of costs? If there is a marginal cost 3/4 between your two cases, do we now need to interpolate your forms of analysis? All because you personally don't like how markets work? Or why not simply use the same method, standard economics, to analyze them? And realize all these products have the same benefits to consumers via varied pricing? >The software stuff you brought up is a red herring. No, it shows how markets work. That you move your goalposts in the middle of a thread is the fallacious reasoning. And you've failed to address that segmentation like this allows people to buy that could not have otherwise. Do you dispute that segmentation allows cheaper pricing for some consumers, and in some products, all consumers? Are you arguing for higher prices or just ignoring this empirical fact?