4 ms·

Uh-uh. This is called market segmentation and it's as old as the street. Haven't trains had a first and a second class for centuries? It's great when I'm not i

by kmm 13y ago

Uh-uh. This is called market segmentation and it's as old as the street. Haven't trains had a first and a second class for centuries? It's great when I'm not interested in the top tier, I'm really glad the prices for my train tickets are (probably) lower than they would be because I'm being subsidised by people in first class. But I do like having the best CPU and a subconscious part of me feel cheated. I know how it works, but I understand people feel cheated.

corin_ 13y ago
Trains are slightly different. First class gives you nicer seats, and potentially other benefits as well, the same scenario would be if first and second class passengers were all together, but first class were allowed off first. Of course, first class could be subsidising second. But it's also possible to structure prices such that it is the other way around.
- mseebach 13y ago
  The analogy works, because the primary thing you're paying for on the train isn't comfort, it's being transported. Second class passengers (even the bloody riff-raff in third!) arrives at exactly the same time. Also, first class passengers are let off first, at least on planes.
  - corin_ 13y ago
    > the primary thing you're paying for on the train isn't comfort, it's being transported Depends how you define "primary", and also depends on how tickets are priced. I don't know enough (or, indeed, anything) about public transport costs/margins/etc. but let's say second class costs $5, first class $10, a nicer seat costs $100 more than a cheap seat, and seats last for 20 journeys before needing to be replaced. In that scenario, the extra cost for first class seat is purely spent on the actual upgrade cost, nothing to do with the fact that you are traveling somewhere. Of course, in my random price list, the upgrade price (i.e. difference between the two options) covers 100% of the actual cost - in real life, maybe it covers 200% and is therefore subsidising cheaper tickets, or maybe it covers 1% and is being subsidised by cheaper tickets. But wherever it falls there, at least some of the cost is going towards the actual, physical cost.
    - mseebach 13y ago
      I define "primary" by observing that practically nobody (save for a very few enthusiasts) ever get on a train or a plane except because they want to arrive at the destination. Riding on a train or a plane to enjoy the journey itself is very rare. Subsidising: Though first class represents less than 5 percent of all seats flown on long-haul routes, and business class accounts for 15 percent, those seats combined to generate 40 to 50 percent of airlines’ revenue http://www.nytimes.com/2011/11/21/business/taking-first-class-coddling-above-and-beyond.html http://www.nytimes.com/2011/11/21/business/taking-first-clas...
      - corin_ 13y ago
        If I buy a beer for $3 on a train, is the primary purpose of that $3 "transport", because practically nobody gets on a train just to drink beer? What if that $3 is merged into the total cost of your ticket and you get the beer included? The fact that it seems airlines do underchage for cheap seats and overcharge for expensive ones is irrelevant - I already pointed out that ticket sellers can go in either direction on this. The point I am making is that you are getting a tangible thing that is more expensive (e.g. a nicer seat) - whether you are being ripped off or not is another matter.
    - tracker1 13y ago
      Or, in reality, they are NOT subsidizing the cheaper seats... they simply mean that the cheap seats generate 10% profit, and the more expensive seats generate 110% profit. No subsidizing necessary. There's a big difference between subsidies, and product classification. In subsidizing, something is being sold at less than actual cost, in classification, some products make more money.
- singlow 13y ago
  It would be more like if all the seats on the train had a reversible cushion with a soft side and a hard side - but you had to pay an extra twenty bucks to turn it over.
  - marshray 13y ago
    More like if you opted out of paying the extra $20, the steward would come by and put stiff boards under your butt to ensure you cannot derive any utility from the cushion that's already there.
  - jerf 13y ago
    Why do we need analogies? This situation is not that complicated to understand. Let's skip the inevitable argument over whose useless analogy is better.
  - blangblang 13y ago
    If this was framed as charging twenty bucks less for those willing to endure the hard side of the cushion, people would be proclaiming anyone sitting on soft cushions as stupid.
- kmm 13y ago
  I see. I think it doesn't cost more to furnish first-class than second class here, they're practically the same, apart from the colour: ugly blue in second class, warm brown in first class. The major difference is that you're not allowed to make noise in first class, which seems like an arbitrary restriction. But it's true the comparison is not perfect.
  - corin_ 13y ago
    In the UK the seats are usually totally different (e.g. http://img3.photographersdirect.com/img/13886/wm/pd3295300.jpg http://img3.photographersdirect.com/img/13886/wm/pd3295300.j... vs. http://farm4.staticflickr.com/3566/3467484793_42379b7d56.jpg http://farm4.staticflickr.com/3566/3467484793_42379b7d56.jpg) - with the most noticeable aspect being that you will fit less first class seats into one train carriage, due to size.
fuzzywalrus 13y ago
To add to this analogy: Software companies have been doing this for years, develop a pro version and then remove features for an entry level version rather than redevelop a new entry level application. Example: Cubase historically had 3-4 versions. Usually a lite/beginner version that severely limited the number of tracks/FX and a few views, a middle range one that included most features, and the Pro version that was unrestricted that featured things that professionals would need (like multiroom mixing so musicians could hear seperate mixes while playing) and then the spin-off Nuendo iteration which largely reused Cubase's codebase but designed for video-post production mixing. Of those 4 products there's only really two "different" products.
SteveGerencser 13y ago
A similar analogy would be cars that are de-tuned for sale to the general public. Modern engine are quite capable of creating far more horsepower and torque than what is available 'from the factory'. You can step up and buy the RS version of the same car with basically the same motor, or you can look for aftermarket workarounds such diesel engine programmers. In the olden days all chips were created to reach a specific performance level. Those that did not reach that level were simply relabeled as lower performance chips. This is effectively what Intel is doing now. But with improved manufacturing processes fewer and fewer chips 'fail' at testing. So the failure rate is manufactured as well to get the most out of every production run.

by kmm 13y ago

corin_ 13y ago

Trains are slightly different. First class gives you nicer seats, and potentially other benefits as well, the same scenario would be if first and second class passengers were all together, but first class were allowed off first. Of course, first class could be subsidising second. But it's also possible to structure prices such that it is the other way around.

mseebach 13y ago
The analogy works, because the primary thing you're paying for on the train isn't comfort, it's being transported. Second class passengers (even the bloody riff-raff in third!) arrives at exactly the same time. Also, first class passengers are let off first, at least on planes.
- corin_ 13y ago
  > the primary thing you're paying for on the train isn't comfort, it's being transported Depends how you define "primary", and also depends on how tickets are priced. I don't know enough (or, indeed, anything) about public transport costs/margins/etc. but let's say second class costs $5, first class $10, a nicer seat costs $100 more than a cheap seat, and seats last for 20 journeys before needing to be replaced. In that scenario, the extra cost for first class seat is purely spent on the actual upgrade cost, nothing to do with the fact that you are traveling somewhere. Of course, in my random price list, the upgrade price (i.e. difference between the two options) covers 100% of the actual cost - in real life, maybe it covers 200% and is therefore subsidising cheaper tickets, or maybe it covers 1% and is being subsidised by cheaper tickets. But wherever it falls there, at least some of the cost is going towards the actual, physical cost.
  - mseebach 13y ago
    I define "primary" by observing that practically nobody (save for a very few enthusiasts) ever get on a train or a plane except because they want to arrive at the destination. Riding on a train or a plane to enjoy the journey itself is very rare. Subsidising: Though first class represents less than 5 percent of all seats flown on long-haul routes, and business class accounts for 15 percent, those seats combined to generate 40 to 50 percent of airlines’ revenue http://www.nytimes.com/2011/11/21/business/taking-first-class-coddling-above-and-beyond.html http://www.nytimes.com/2011/11/21/business/taking-first-clas...
    - corin_ 13y ago
      If I buy a beer for $3 on a train, is the primary purpose of that $3 "transport", because practically nobody gets on a train just to drink beer? What if that $3 is merged into the total cost of your ticket and you get the beer included? The fact that it seems airlines do underchage for cheap seats and overcharge for expensive ones is irrelevant - I already pointed out that ticket sellers can go in either direction on this. The point I am making is that you are getting a tangible thing that is more expensive (e.g. a nicer seat) - whether you are being ripped off or not is another matter.
  - tracker1 13y ago
    Or, in reality, they are NOT subsidizing the cheaper seats... they simply mean that the cheap seats generate 10% profit, and the more expensive seats generate 110% profit. No subsidizing necessary. There's a big difference between subsidies, and product classification. In subsidizing, something is being sold at less than actual cost, in classification, some products make more money.
singlow 13y ago
It would be more like if all the seats on the train had a reversible cushion with a soft side and a hard side - but you had to pay an extra twenty bucks to turn it over.
- marshray 13y ago
  More like if you opted out of paying the extra $20, the steward would come by and put stiff boards under your butt to ensure you cannot derive any utility from the cushion that's already there.
- jerf 13y ago
  Why do we need analogies? This situation is not that complicated to understand. Let's skip the inevitable argument over whose useless analogy is better.
- blangblang 13y ago
  If this was framed as charging twenty bucks less for those willing to endure the hard side of the cushion, people would be proclaiming anyone sitting on soft cushions as stupid.
kmm 13y ago
I see. I think it doesn't cost more to furnish first-class than second class here, they're practically the same, apart from the colour: ugly blue in second class, warm brown in first class. The major difference is that you're not allowed to make noise in first class, which seems like an arbitrary restriction. But it's true the comparison is not perfect.
- corin_ 13y ago
  In the UK the seats are usually totally different (e.g. http://img3.photographersdirect.com/img/13886/wm/pd3295300.jpg http://img3.photographersdirect.com/img/13886/wm/pd3295300.j... vs. http://farm4.staticflickr.com/3566/3467484793_42379b7d56.jpg http://farm4.staticflickr.com/3566/3467484793_42379b7d56.jpg) - with the most noticeable aspect being that you will fit less first class seats into one train carriage, due to size.

fuzzywalrus 13y ago

To add to this analogy: Software companies have been doing this for years, develop a pro version and then remove features for an entry level version rather than redevelop a new entry level application. Example: Cubase historically had 3-4 versions. Usually a lite/beginner version that severely limited the number of tracks/FX and a few views, a middle range one that included most features, and the Pro version that was unrestricted that featured things that professionals would need (like multiroom mixing so musicians could hear seperate mixes while playing) and then the spin-off Nuendo iteration which largely reused Cubase's codebase but designed for video-post production mixing. Of those 4 products there's only really two "different" products.

SteveGerencser 13y ago

A similar analogy would be cars that are de-tuned for sale to the general public. Modern engine are quite capable of creating far more horsepower and torque than what is available 'from the factory'. You can step up and buy the RS version of the same car with basically the same motor, or you can look for aftermarket workarounds such diesel engine programmers. In the olden days all chips were created to reach a specific performance level. Those that did not reach that level were simply relabeled as lower performance chips. This is effectively what Intel is doing now. But with improved manufacturing processes fewer and fewer chips 'fail' at testing. So the failure rate is manufactured as well to get the most out of every production run.