alco_fan wrote: WickhamMan wrote: I'm not sure I see the relevence of the minimum wage calculations. Because minimum wages rates have not been adjusted for inflation, comparing those in 1970 to 2005 does not seem valid. I'll submit they are extremely relavant. If it were taking twice as many minimum wage hours to afford the same item in 2005, for example, one could say that the impact to younger, less-affluent hobbyists was greater than the CPI-based comparisons suggest. But in fact, there is not a huge difference in the minimum-wage hours worked to afford similar items in 2005 vs. 1970. So maybe it's not valid in a theoretical economics sense (where this thread seems to be going). But in a practical sense of "what can an entry-level hobbyist afford", it's arguably much more relavant than all the Veblen goods theory one could promulgate. (And one could have argued that the Veblen goods in this market were high-end brass locos, but that's been proven false, IMHO, by the decline of brass in favor of better-performing and less expensive locos like BLI. The majority of the consumers in this space don't wish to pay more for items just to gain status, again, IMHO) OK, I did post again, after all. Jon
WickhamMan wrote: I'm not sure I see the relevence of the minimum wage calculations. Because minimum wages rates have not been adjusted for inflation, comparing those in 1970 to 2005 does not seem valid.
I'm not sure I see the relevence of the minimum wage calculations. Because minimum wages rates have not been adjusted for inflation, comparing those in 1970 to 2005 does not seem valid.
I'll submit they are extremely relavant. If it were taking twice as many minimum wage hours to afford the same item in 2005, for example, one could say that the impact to younger, less-affluent hobbyists was greater than the CPI-based comparisons suggest. But in fact, there is not a huge difference in the minimum-wage hours worked to afford similar items in 2005 vs. 1970.
So maybe it's not valid in a theoretical economics sense (where this thread seems to be going). But in a practical sense of "what can an entry-level hobbyist afford", it's arguably much more relavant than all the Veblen goods theory one could promulgate.
(And one could have argued that the Veblen goods in this market were high-end brass locos, but that's been proven false, IMHO, by the decline of brass in favor of better-performing and less expensive locos like BLI. The majority of the consumers in this space don't wish to pay more for items just to gain status, again, IMHO)
OK, I did post again, after all.
Jon
Jon,
I agree that the prices faced by entry level modelers and their incomes make a difference in the hobby. I'm just not sure that the minimum wage factors into this much. The minimum wage is a government wage floor whose value is arbitrarily determined. If high enough, it might make a difference within an analysis of the market. However, at its current historical low, I wold submit that the minimum wage has very little relevance to wages. I'm sure that 20+ years ago, the MW was highly correlated with entry level work, especially among adults. However, today, the average wage is more determined by market forces than the MW. So, the comparison would not be valid.
If we could come up with a correlation between the MW and the average entry level wage for both periods, we could adjust the current data...ugh! Too much work for me!
andrechapelon wrote: That's interesting. I don't give a (insert scatological reference here) about government subsidies that might lower the price of a car, what I am interested in is reliability, functionality and practicality. While price is a consideration, it's secondary.. I once bought a car based primarily on the price. That was a BIG mistake that will never happen again. I will, however take advantage of specials on vehicles that otherwise fit the "profile". As far as MRR equipment goes, most of the time, there's only one or at most two suppliers. If you're looking for high quality moderately priced heavyweight passenger cars, you're pretty much limited to Walthers and Branchline. However, Walthers offers a bigger variety of types. When it comes to streamlined passenger cars that are moderately priced and high quality, Walthers has pretty much has the market at this time (unless you have a burning desire for a complete California Zephyr consist). Then there's the UP Big Boy where it seems there are almost as many manufacturers as there were prototype locomotives. I know that's not true, but it appears that way on occasion. The thing is, if you model a prototype other than UP, the price doesn't matter much since you're not likely to buy unless they're practically giving them away. If you're even moderately disciplined in your purchasing habits, you won't buy even then. Andre
That's interesting. I don't give a (insert scatological reference here) about government subsidies that might lower the price of a car, what I am interested in is reliability, functionality and practicality. While price is a consideration, it's secondary.. I once bought a car based primarily on the price. That was a BIG mistake that will never happen again. I will, however take advantage of specials on vehicles that otherwise fit the "profile".
As far as MRR equipment goes, most of the time, there's only one or at most two suppliers. If you're looking for high quality moderately priced heavyweight passenger cars, you're pretty much limited to Walthers and Branchline. However, Walthers offers a bigger variety of types. When it comes to streamlined passenger cars that are moderately priced and high quality, Walthers has pretty much has the market at this time (unless you have a burning desire for a complete California Zephyr consist).
Then there's the UP Big Boy where it seems there are almost as many manufacturers as there were prototype locomotives. I know that's not true, but it appears that way on occasion. The thing is, if you model a prototype other than UP, the price doesn't matter much since you're not likely to buy unless they're practically giving them away. If you're even moderately disciplined in your purchasing habits, you won't buy even then.
Andre
Andre,
Once again you make an excellent point. I was not implying that price was the only (or even most important) factor in the purchase of a car or other commodity. We both agree that it is certainly a factor. I would argue that no one buys a good solely on quality. If the price is high enough, quality considerations will give way to price. I'm sure you don't buy the most expensive car made. Like me, you probably buy the best made car within your budget. That's why I bought a Toyota with the hidden subsidy instead of the Chevy/Ford/Kia/whatever.
I agree that individual preferences may affect ones ability to choose between substitutes. However, in the example you gave, there are many on this forum who would argue against the limitations you stated. The easiest argument is that you could always purchase undecorated stock and paint/decal it yourself. Of course, this raises the price (in terms of time) but adds flexibility to purchasing choices. I think it will be interesting to explore the market segment you identified to see why so few vendors make "quality" passenger stock.
Keep 'em coming.
alco_fan wrote: Based on my experience, you may find it a frustrating prospect. I put up the chart below in a thread some months ago and was shouted down by our favorite gloom and doomer who insisted that the Consumer Price Index is a lie, that I picked the wrong decade for comparisons, and left out the key (Tyco, if I remember correctly) engine that proved all my other data was false. Oh, well. The data is pretty straightforward. I simply compared advertised prices from September of 1970 with September of 2005. Using the Consumer Price Index (CPI), it's easy to determine what the price "should" be in 2005. Comparing the 1970 price with the equivalent for the same item shows us if they are relatively cheaper or relatively more expensive. I also considered how many hours someone working at the Federal minumum wage would work to earn the item and compared those values. As can be seen, almost all the items I compared were cheaper in 2005 than in 1970 when considering the inflation in intervening years captured in the CPI. Looking at the first nine items, only two items were more expensive: an annual MR subscription (11% higher); and an Atlas freight car kit in 1970 compared to an Atlas RTR model today (8% higher). One could argue, of course, that the difference in production values in MR such as color (it was balck and white with spot one-color in 1970) are part of that increase. And by the time one pays for paint and glue, the difference between the Atlas kit of 1970 and Atlas RTR of 2005 would be smaller. When the subscription cost per page of MR is considered, Sept. 2005 is actually less. It's interesting to note (line 10) that comparing the Bowser kit of 1970 with Bowser's detailing kit to a BLI RTR loco in Sept. '05 shows the BLI only 8% more expensive! And I think all would agree that the BLI is a much better detailed and proably better-running engine. The comparison is slightly less rosy when considering hours worked at Federal minimum wage to earn each item, but it can still be seen that some prices are still relatively lower in 2005 than in 1970. It's also worth noting that fewer people work at Federal minimum wage today than in 1970, since many states are well above the federal minimum. And even mcDonald's hires new employees at well above the minimum wage in most areas. So even teen burger-flippers may not be as badly off as is often portrayed, especially for anyone in those states with a minimum wage higher than the federal. Also note that I used the minimum wage current in Sept. 2005, not the new increased Federal minimum wage. All of these are advertised prices in the September MRs of each year with the exception of the Atearn Blue Box kit of 2005. I used an on-line price for the 2005 value, since I did not find a lot of ads for BB in the Sept 2005 MR. I submit this only as an example. Other comparisons may be less or more favorable to today's pricing. I won't post again to this thread, since this post alone will no doubt incite howls of protest similar to the last time I posted and life is too short for those arguments. Jon
Based on my experience, you may find it a frustrating prospect. I put up the chart below in a thread some months ago and was shouted down by our favorite gloom and doomer who insisted that the Consumer Price Index is a lie, that I picked the wrong decade for comparisons, and left out the key (Tyco, if I remember correctly) engine that proved all my other data was false. Oh, well.
The data is pretty straightforward. I simply compared advertised prices from September of 1970 with September of 2005. Using the Consumer Price Index (CPI), it's easy to determine what the price "should" be in 2005. Comparing the 1970 price with the equivalent for the same item shows us if they are relatively cheaper or relatively more expensive. I also considered how many hours someone working at the Federal minumum wage would work to earn the item and compared those values.
As can be seen, almost all the items I compared were cheaper in 2005 than in 1970 when considering the inflation in intervening years captured in the CPI. Looking at the first nine items, only two items were more expensive: an annual MR subscription (11% higher); and an Atlas freight car kit in 1970 compared to an Atlas RTR model today (8% higher). One could argue, of course, that the difference in production values in MR such as color (it was balck and white with spot one-color in 1970) are part of that increase. And by the time one pays for paint and glue, the difference between the Atlas kit of 1970 and Atlas RTR of 2005 would be smaller. When the subscription cost per page of MR is considered, Sept. 2005 is actually less.
It's interesting to note (line 10) that comparing the Bowser kit of 1970 with Bowser's detailing kit to a BLI RTR loco in Sept. '05 shows the BLI only 8% more expensive! And I think all would agree that the BLI is a much better detailed and proably better-running engine.
The comparison is slightly less rosy when considering hours worked at Federal minimum wage to earn each item, but it can still be seen that some prices are still relatively lower in 2005 than in 1970. It's also worth noting that fewer people work at Federal minimum wage today than in 1970, since many states are well above the federal minimum. And even mcDonald's hires new employees at well above the minimum wage in most areas. So even teen burger-flippers may not be as badly off as is often portrayed, especially for anyone in those states with a minimum wage higher than the federal. Also note that I used the minimum wage current in Sept. 2005, not the new increased Federal minimum wage.
All of these are advertised prices in the September MRs of each year with the exception of the Atearn Blue Box kit of 2005. I used an on-line price for the 2005 value, since I did not find a lot of ads for BB in the Sept 2005 MR.
I submit this only as an example. Other comparisons may be less or more favorable to today's pricing. I won't post again to this thread, since this post alone will no doubt incite howls of protest similar to the last time I posted and life is too short for those arguments.
Jon,I am sorry but,your prices and the prices I am checking doesn't jive..Where are you getting your prices?
Atlas advertises the "snap" switch for $10.75 not $7.29.The Athearn GP35 is $84.97 not the $57.49.Athearn kits are 8.50 not the $5.99 You must use full MSRP to find the real cost increase over the years..Anything other full MSRP is Padding the numbers so the increase doesn't look as grim.And that my friend doesn't get it in a REAL economic discussion.
BTW..Why are you using minimum wage instead of real average wages?
I suppose the word "Fluff Prices" should be used for this discussion since there is NO REAL COMPARISON at full MSRP between the years.
Larry
Conductor.
Summerset Ry.
"Stay Alert, Don't get hurt Safety First!"
Andre does make a good point in regards to modeling to a prototype. Since New Haven models in my era aren't all that easy to come by, I buy what I can find. I try to find a good price, but I have a LHS with a great owner, with lots of information, reasonable prices, and who knows what I need. So I don't shop around as much because I'm paying for convenience. In addition to saving me time, I also find that the information, and resources are well worth any extra amount I may be paying. I typically only purchase items elsewhere that I can't get from him. As long as he can order it, I get it there.
I'm sure that the manufacturers have tweaked their manufacturing model to take advantage of the supply and demand paradigm though. As a kid I recall seeing every store stocked with pretty much the same stuff, year in and year out. Nowadays everything seems to be a limited run. If you want it, then you'd better buy it now. Waiting for it to be on clearance or marked down is risky because they are often long gone before they get to that point. Especially if you aren't modeling UP, Santa Fe, PRR, etc. This does affect the price of the items and may very well make it appear that the general cost of the hobby has increased. On the other hand, the models are far more prototypically correct, instead of just slapping a name on a car or locomotive that was never owned by a particular railroad.
Of course, if you aren't as particular about your roadnames or accuracy, they may seem considerably overpriced. Then again, if you aren't that particular, you can afford to look for the markdowns regardless of the roadname, or you may just be modeling the more common roadnames anyway.
Another thing that bears mentioning is that the LHS prices are largely determined by the distributors practices. I won't go into specific details, but I get the sense that the major distributors aren't entirely savvy about the products they sell, and who they are selling them to, at least in a business sense. This has made it more difficult for the small LHS to compete with a huge business selling online or via eBay. Their incentive programs aren't conducive to the regionality and small volume on individual models that the hobby fosters. Where I live an accurate NH model will sell so fast he can't keep it in stock, but that won't hold true to a LHS in the heart of Santa Fe country. There may be a few NH modelers there, but not like in CT.
Randy
WickhamMans sez:
For example, when I examine the auto industry and the government regulations on it, I am able to make a better buying decision by understanding which makes/models have hidden government subsidies that lower the price. I don't particularly care if cars are more or less expensive than they were 20 years ago. I'm out for a good deal and will get one if I examine the market. This may not be possible in our hobby but something tells me that it is. In any case, it's a fun exercise for me to walk down the path and find out.
Cool thread. Somebody mentioned that we couldn't get circulation data on Model Railroader. I believe magazined are required to publish their circulation data once a year in their magazine. It's usually in the front, and I think it's in an early issue for each "volume" (which may not correspond with a calendar year). I don't have any here so I can't check right now.
Another thing I want to point out that affects the affordability is the desire of the hobbyist. For example, you listed various age groups and their various economic situations is also reflected in their available hobby space and time.
Kids have lots of time, but not much money. They rely on their parents to provide the space so that may vary. Unless mentored by a parent, or others in the hobby, this is a time when quantity and variety are frequently more important than quality and accuracy. So even though they may not have much of their own spending money, they typically won't mind the lower-priced options available. Parents who aren't modelers often foster this because they don't understand the value of a more accurate, better detailed, and better operating railroad. This is typically OK, because when the parents are buying less expensive stuff they can usually get more.
The next generation (16ish to maybe mid-to-late 20s) could be separated into two sections. The younger ones will probably have some money from their first jobs, but less time (from jobs, school activities, and oh yes, dating (or whatever it is kids do today). If they are still modeling they may be more interested in better quality, or at least better realism, although not necessarily prototypical.
The older ones in this period will be in college or early career-type jobs. Again, time will be at a premium, and so is space. This is the perfect time to start getting more serious about quality and more prototypical (even if freelancing) models. These are more expensive, but with possibly no space for a layout, and modeling time in short periods spread over a long time, a single detailed model can take weeks to build. This spreads the cost out as well due to less quantity, although it may be offset somewhat by more expensive models.
This age is also a great time to be modeling with friends, or a modeling club where they can share the cost and still get in a lot of modeling time.
The next bracket is the young families, who once again are pressed for time, may have a little more space if they have purchased a house, and a (hopefully) growing income. The needs of the family can affect the available cash, but again this is a good time to be working on modeling skills, high quality models, and working with clubs.
As the family grows (kids go to school) and things settle down, then that offers more opportunity for building a more sizable layout. Again, the income trend should theoretically be increasing in addition to the time and space available. This is when the quantity starts to catch up to the quality again.
Anyway, I think these trends continue into later years, but you get the idea. Of course, not everybody is like this (including me in many ways), but when generalizing things it's probably in the ballpark.
The more important thing, though, is to factor in the desires of the modeler, as I said. People who do high quality, prototypically accurate, modifying or scratchbuilding where needed, often spend less money and more time on the model. Those who aren't as particular, or who prefer running trains to modeling, as well as those who are more pressed for time will probably end up spending more, especially if they are drawn in by the quality they see on other layouts and in the magazines. If you want fine detail it will cost time and/or money. How much you are willing to sacrifice on one is usually directly related to the other.
It all comes down to what the modeler values. If their time is more important to them, then they will typically spend more on the models (although they may not want to). Those that like to model might spend a month on a single boxcar, and they might spend a lot of extra money on parts, but because they can only finish so much in a given period of time, the cost probably isn't all that different. Actually, the real difference may be the value they put on the hobby itself. Somebody who would spend a month building a boxcar is probably willing to spend more than a more casual modeler.
So how to we find a way to make it more affordable for people? In my opinion - mentoring. Share your time, knowledge and layout with others. You may not want them modeling on your layout, but they can certainly bring their models with them. For scenery and structures it's often nice to have somebody helping out, and you may even be able to split the cost. Sharing resources (books, magazines, etc.) and even parts can cut the cost. Finding a local club is another great resource in a similar vein. In my opinion, many of those who don't model in the sense of building kits, kitbashing, or even trying their hand at something from scratch, would often be interested if they had somebody to help them, and to share in the models. Superdetailing a train is a lot of fun, but it's more fun if somebody is actively admiring and appreciating your effort. And let's face it, that's not always going to be your spouse or other friends. All too often we hide in the basement doing our thing, but it can be a lot of fun with others who enjoy the hobby as well (even if they enjoy different aspects).
As an example, here is my current situation. I don't have a whole lot of free cash, but then I don't have a ton of space either. So I'm just about to get started building a layout with 2 towns, and a small yard with some engine servicing. I'm getting pretty detailed, and modeling a specific prototype - which is also helping since it limits what I'm willing to purchase. I'm taking my time experimenting with more advanced modeling techniques to bring the level of detail up, but that's also increasing the cost of each car (new couplers, wheels, detail parts, paint and decals, etc.). However, a lot of this is in the spirit of experimentation to see what I can do, what I'm willing to do, and if I can find ways to do it faster, cheaper, or both.
The prime example right now: I'm building my benchwork out of ripped OSB, and masonite splines. I'll need a few pieces of dimensional lumber, but I already have that on hand. My original estimate for building my benchwork with dimensional lumber was $300+. With the techniques I'm trying now, I should be able to build the entire benchwork and spline roadbed for under $40. It will take more effort on my part (and requires access to a table saw). But I'm willing to spend the time and effort to save that much money. In the end I think it will be as sound as my first plan.
andrechapelon wrote: selector wrote: Now that all horses are through the gates, with WickhamMan on the inside, andre chapelon hard on the outside, I wonder who will "finish" first? Good luck, fellas. If by "finish" first you mean win, conventional wisdom says it will be the one with the most toys. OTOH, I didn't know there was a competition going on. Something tells me WickhamMan doesn't either. Andre
selector wrote: Now that all horses are through the gates, with WickhamMan on the inside, andre chapelon hard on the outside, I wonder who will "finish" first? Good luck, fellas.
Now that all horses are through the gates, with WickhamMan on the inside, andre chapelon hard on the outside, I wonder who will "finish" first?
Good luck, fellas.
If by "finish" first you mean win, conventional wisdom says it will be the one with the most toys.
OTOH, I didn't know there was a competition going on. Something tells me WickhamMan doesn't either.
I'll take 4 dollars on Win, Place and Show please. =)
Andre is right. I'm pretty agnostic about this topic. I'm more interested in exploring the possibilities and giving people information. I don't particularly care if things are more or less expensive than in days gone by (I never bought things then). I'm not out to "prove" anything other than a dispassionate look at the economics of our hobby might identify some opportunities for us hobbyists.
Having a "strong opinion" about this, to me, is like having a strong opinion about gravity. I don't really care about the opinion, I just want to get a measurement so I know how soon to pull the rip cord!
Yeah, it was a tongue-in-check play on all the words and the analogy of "They're off...!" I hope to learn something from the economists since my expertise is in another social science...human behaviour, and I may be able to contribute something in the days ahead.
Keep it coming, guys..!
WickhamMan wrote: Jon, Thanks for the nice set of data. I like the comparison of costs across time using the CPI. I too believe there are problems with the CPI but they are very minor and wouldn't detract from your main point. Once we get into price changes over time, this data will be very useful. I'm not sure I see the relevence of the minimum wage calculations. Because minimum wages rates have not been adjusted for inflation, comparing those in 1970 to 2005 does not seem valid. The points you make about minimum wage rates speak to that. However, you are certainly on to something. If we can somehow find the average wages of those within the market, the comparison might be useful. Thanks for participating.
Thanks for the nice set of data. I like the comparison of costs across time using the CPI. I too believe there are problems with the CPI but they are very minor and wouldn't detract from your main point. Once we get into price changes over time, this data will be very useful. I'm not sure I see the relevence of the minimum wage calculations. Because minimum wages rates have not been adjusted for inflation, comparing those in 1970 to 2005 does not seem valid. The points you make about minimum wage rates speak to that. However, you are certainly on to something. If we can somehow find the average wages of those within the market, the comparison might be useful.
Thanks for participating.
What do you hope to accomplish with this?
In answer to one of the gloom and doomers, I did a lot of research on prices in the 80's vs. today since said gloom and doomer pointed to the 80's as the low point of hobby prices. The data I came up (using various discount outlets in the 80's vs. my starting point of full retail in the 50's) indicated that it didn't really matter if you start with the 50's or the 80's. Unfortunately, when I went to post my reply, my DSL took that opportunity to go haywire and I couldn't recover the info I had collected.
In the end, it doesn't matter whether or not inflation adjusted prices are higher, the same, or lower that at any time in the past. There is still going to be a (considerable) body of opinion that we're being gouged when buying hobby material. That isn't going to change. It doesn't matter what the facts are, nor does it appear to matter that the hobby is funded with discretionary income and one can use one's discretion not to buy.
I'm not surprised that's there's been a lot of interest in this whole question about whether or not the hobby is getting too expensive. I've been reading comments to that effect for quite some time but, so far as I'm aware, no one has taken the time to do a more educated study.
There was a point made by one of the other members regarding the issues of factoring in the cost of DCC to a time when that technology wasn't available. In other words, "apples and oranges". I believe there's another "apples and oranges" situation which isn't necessarily as obvious, but in it's own way could effect the comparison. That's the big change in standards.
Here's an example. A number of years ago, I started buying brass locomotives. At the time, my friends and I thought they were the best looking, most detailed models around. Then we moved. I packed everything up and didn't even look at them for quite a while during the time it took to get the basement in shape for the new layout. I'll never forget the feeling as I unwrapped them in the new house. To be blunt - they looked like second rate models. The details appeared clunky with pieces of wire for windshield wipers, unrealistic screening that was supposed to represent air intakes and thick grating for the see-through areas behind the cabs. The models hadn't changed, so what had? During the time they were stored in boxes, Atlas, Athearn and other manufacturers had started releasing models with much finer details and better running mechanisms. I'd purchased a couple of them and they had become my new standard. Of course, the same thing had happened with a lot of my rolling stock. I eventually sold off the brass and started replacing most of my earlier cars with more recent versions.
The point is - what many of us were satisfied with years ago just doesn't look acceptable today beside the newer equipment with their see-through walkways, separately applied wire grabs, beautifully detailed roof fans and coupler cut levers. So, when we compare pricing from now to then we also have to understand that a lot of the increase in cost may very well reflect the cost of the new and far more accurate tooling that many of us have come to expect. I'm not saying that modelers are wrong to demand this kind of realism. I wouldn't want to go back to those earlier days. I'm simply saying that it's unrealistic for us to think that the cost of producing such finely detailed models isn't going to be reflected in the price. If these models had been available years ago, I'm sure they'd have been a lot more than the typical "shake the box" kits we all grew up with.
Your Qoute:
Oh yeah, if you're going to discuss whether or not vendors like Atlas, BLI, et. al. are not respecting us in the morning, you'll want to discuss such things as barriers to entry, capital intensive vs. labor intensive manufacturing methods, market share and economies of scale (or lack of same in the MR industry). As an aside, I was struck with the rapidity with which BLI/PCM entered the (primarily) HO locomotive market and was able in just 5 or so years to become the pre-eminent supplier of DCC sound equipped locomotives. BLI/PCM was obviously very well capitalized out of the chute and was able to create quite an economic moat around its business. Well, a relative moat, anyhow. The MRR market is very small potatoes in the overall economy.
End Qoute
Very nice posting. I point to BLI/PCM's emergence and dominance in the Motive power becuase they make HO scale steam engines that actually PULL stuff uphill.
I am a customer that is extremly cautious of anything new and great. I first heard the BLI's Hudson at our own OTM in Little Rock some years ago. It had great sound and volume while it sat shouting it's effects to the whole store.
People came to see what the noise is about and to see that thing chuffing back and forth was a pleasure. Sure it had a price tag of a few hundred dollars and ran off a analog power pack.... but DOES IT PULL>?
A friend of mine bought a Heavy Mike from BLI and that thing marched upgrade with 15+ cars on a 3% with 24" radius curves at each end without spinning wheels.
That was all the proof that this customer who was not sure if that BLI hudson was all noise and no pull. Overnight the analog engines that cannot pull got sold on ebay and the profits used to replace it with a few chosen BLI engines like the M1a that is a reliable favorite in my round house.
No wonder BLI has such power and that "Moat" around thier company today. I believe thiers is a company that produces a product that actually PULLS and is of good quality. That is worth a truckload of crappy pancake motor equipped steamers or tycos that derail when you breath on it.
I enjoyed the extra winter hours at my part time job to get a nice ABBA desiel set that I think in my humble opinion does better than Athearn Genesis.
I suppose financial postings and debate will always occupy our free time in this hobby.
I feel this will/is an interesting thread. However, one thing that is somewhat unique in this hobby as opposed to most other hobbies is the way new rolling stock and/or locomotives are introduced. I am referring to pre-orders.
For example I don't think golf clubs, model planes engines, etc are pre-ordered before manufacturing begins.
The model train pre-order has to affect the MSRP of these products as there is less of a gamble in making the first run of these products.
If the price affect is high or low I do not know.
But it surly does affect supply and demand economics, does it not?
From the far, far reaches of the wild, wild west I am: rtpoteet
WickhamMan wrote: OK, it looks like there might be sufficient interest in this topic to move forward. First, I would like to propose some rules/guidelines to make the discussion more fruitful. I know, I know, only trains.com makes the rules on this forum. However, from the standpoint of this thread, I would like the discussion to be limited to the topic at hand and the points discussed. Anyone is free, of course, to slap in a message about the price of eggs or whatever but, it won’t keep the discussion on track or as useful. IMHO. First, let’s talk a bit about some generic concepts that many of you are more than likely familiar with. This may be a bit boring to some but it will lay the parameters for discussing some of the stuff that we care about. Concept: DEMAND Loosely defined, demand is the amount of a given product you are willing (not able) to purchase at differing levels of price. For example, you may be willing to pay $1.25 for a bag of M&Ms. However, as the price drops you might be willing to buy more. For a price of $0.75, you might pay for two bags. For $0.50, you might be willing to pay for 4. However, once the price reaches a certain low point, your desire to by more is lessened because of diminishing returns. So, for $0.05 per bag, you might only buy 10 even though your overall spending is less than if you would have purchased 1 bag at the original price of $1.25. Demand is usually graphed like this: Concept: SUPPLY Supply is the opposite of demand. It is the amount of product a company (or market) is willing to produce and sell at a given set of prices. As prices rise, companies are willing to produce more. As prices fall, companies are willing to sell less. This is largely due to the fact that most products have a cost curve that is upward sloping. That is to say that it costs companies more to produce the next engine than the last one. Supply curves are typically upward sloping like this: Concept: Fixed and variable costs Of course, those of us familiar with the model railroading business (or any manufacturing business) know that the first engine produced costs way more than the second. This is due to the fixed costs associated with tooling up to produce the first one. Once that cost is accounted for, the first engine really does cost more than the second. As a plant produces more, the incremental costs of additional production go up due to a variety of factors including maintenance, overtime, etc. For the purposes of this discussion, I will limit the analysis to variable costs to keep things simple. Concept: Market equilibrium Market equilibrium is the point where overall demand (the aggregate demand of all consumers of a good) meets with market supply. This is generally referred to as a point of market efficiency. If BLI produces Hudsons at a price above the equilibrium point, they won’t sell a many as they could have. If they produce them at a price below equilibrium point, there will be a shortage and again, they won’t sell as many as they could have. Economics generally assumes that in “working markets”, prices of goods and services are set at these efficient points. If they are not, the market is somehow broken. One of the complaints most heard/read on this forum is that prices are “too high” or that vendors are “bilking us”. The question is: how could this happen in a competitive market? Comments? Next topic: Do vendors like Atlas, BLI, etc. make unseemly profits at our expense?
OK, it looks like there might be sufficient interest in this topic to move forward. First, I would like to propose some rules/guidelines to make the discussion more fruitful. I know, I know, only trains.com makes the rules on this forum. However, from the standpoint of this thread, I would like the discussion to be limited to the topic at hand and the points discussed. Anyone is free, of course, to slap in a message about the price of eggs or whatever but, it won’t keep the discussion on track or as useful. IMHO.
First, let’s talk a bit about some generic concepts that many of you are more than likely familiar with. This may be a bit boring to some but it will lay the parameters for discussing some of the stuff that we care about.
Concept: DEMAND
Loosely defined, demand is the amount of a given product you are willing (not able) to purchase at differing levels of price. For example, you may be willing to pay $1.25 for a bag of M&Ms. However, as the price drops you might be willing to buy more. For a price of $0.75, you might pay for two bags. For $0.50, you might be willing to pay for 4. However, once the price reaches a certain low point, your desire to by more is lessened because of diminishing returns. So, for $0.05 per bag, you might only buy 10 even though your overall spending is less than if you would have purchased 1 bag at the original price of $1.25. Demand is usually graphed like this:
Concept: SUPPLY
Supply is the opposite of demand. It is the amount of product a company (or market) is willing to produce and sell at a given set of prices. As prices rise, companies are willing to produce more. As prices fall, companies are willing to sell less. This is largely due to the fact that most products have a cost curve that is upward sloping. That is to say that it costs companies more to produce the next engine than the last one. Supply curves are typically upward sloping like this:
Concept: Fixed and variable costs
Of course, those of us familiar with the model railroading business (or any manufacturing business) know that the first engine produced costs way more than the second. This is due to the fixed costs associated with tooling up to produce the first one. Once that cost is accounted for, the first engine really does cost more than the second. As a plant produces more, the incremental costs of additional production go up due to a variety of factors including maintenance, overtime, etc. For the purposes of this discussion, I will limit the analysis to variable costs to keep things simple.
Concept: Market equilibrium
Market equilibrium is the point where overall demand (the aggregate demand of all consumers of a good) meets with market supply. This is generally referred to as a point of market efficiency. If BLI produces Hudsons at a price above the equilibrium point, they won’t sell a many as they could have. If they produce them at a price below equilibrium point, there will be a shortage and again, they won’t sell as many as they could have.
Economics generally assumes that in “working markets”, prices of goods and services are set at these efficient points. If they are not, the market is somehow broken.
One of the complaints most heard/read on this forum is that prices are “too high” or that vendors are “bilking us”. The question is: how could this happen in a competitive market?
Comments?
Next topic: Do vendors like Atlas, BLI, etc. make unseemly profits at our expense?
You do realize, don't you that you've bitten off a lot, don't you?
Wait'll their eyes glaze over when you start discussing the price elasticity of demand and why model railroad items are relatively price inelastic.
Then try explaining the concept (or the myth, if you will) of consumer rationality. Especially on this forum .
If you get the time, you might even be able to demonstrate that (theoretically, at least) some MRR items might be Giffen goods and some Veblen goods. Personally, if you go that far, I think you'd want to have Veblen's Theory Of The Leisure Class as required reading.
Sansouci,
You pose some good questions which will be nice to explore. I also appreciate the contribution on elasticities (or should I thank Case and Fair? ). This will be good to look back to when we get to that topic. For now, I think you are racing ahead a bit. Elasticities don't directly impact market efficiency (or lack thereof). However, you are correct in that they may impact profitability in the short run. In the long run, they don't matter.
Thanks.
Useful wages?
If you are not in a skilled position using training or college degree, you will probably make less than 10 dollars an hour today. A very large percentage of that money goes to rent, gasoline and food as well as utilities. (Cigerettes and beer probably as well)
Minimum wages are scheduled to go up about 1 dollar here in Arkansas October 1 and that will probably create more unemployed workers as Employers consolidate the overall work to fewer workers to hold the line on payroll expenses.
At the height of my Trucking as a Team with the Wife I was running very high dollar loads with 24/7 productivity and a income in excess of 60K a year net. Believe me, I never looked at price tags in that time period. I just walked into whatever store I wanted, paid for the item and took it home ignorant of the price tag itself.
It would be better to look at the lower wages and the people making them. They probably dont have the desire to spend the food money on toys and trains anyways.
My Income is small compared to the high days of trucking. But I still manage to enjoy the hobby because we are paying off debt and have a spouse who actually increased my budget for the holiday season.
I think there may be some sources of "facts" that we do not have readily available:
1) MRR circulation data and demographic profile of subscribers. Not sure how much research Kalmbach does in its business as to age and income and spending patterns of subscribers and readers
2) Is there a trade organization that tracks company sales?
3) The fact that equipment and technology continues to evolve doesn't hamper economic analysis. Price indices are the bread and butter of economic analysis
4) Demand reflects the elasticity characteristics. But what are they?
Some definitions and theory below---
Price elasticity of demand is measured as the percentage change in quantity demanded that occurs in response to a percentage change in price. For example, if, in response to a 10 % fall in the price of a good, the quantity demanded increases by 20 %, the price elasticity of demand would be 20 %/(− 10 %) = −2. (Case & Fair, 1999: 109).
In general, a fall in the price of a good is expected to increase the quantity demanded, so the price elasticity of demand is negative as above. Note that in economics literature the minus sign is often omitted and the elasticity is given as an absolute value. (Case & Fair, 1999: 110). Because both the denominator and numerator of the fraction are percent changes, price elasticities of demand are dimensionless numbers and can be compared even if the original calculations were performed using different currencies or goods.
An example of a good with a highly inelastic demand curve is salt: people need salt, so for even relatively large changes in the price of salt, the amount demanded will not be significantly altered. Similarly, a product with a highly elastic demand curve is red cars: if the price of red cars went up even a small amount, demand is likely to go down since substitutes are readily available for purchase (cars of other colors).
It may be possible that quantity demanded for a good rises as its price rises, even under conventional economic assumptions of consumer rationality. Two such classes of goods are known as Giffen goods or Veblen goods. Another case is the price inflation during an economic bubble.
When the price elasticity of demand for a good is elastic (Ed > 1), the percentage change in quantity is greater than that in price. Hence, when the price is raised, the total revenue of producers falls, and vice versa.
When the price elasticity of demand for a good is inelastic (Ed < 1), the percentage change in quantity is smaller than that in price. Hence, when the price is raised, the total revenue of producers rises, and vice versa.
Are hobbies elastic or inelastic? If the introduction and sale of high priced models is any indicator, then they may be inelastic. Sort of like gasoline. You need it regardless of price and without subtitutes, only a little demand destruction occurs.
Let the discussion continue...
Profits?
I dont think BLI made too much profit. The recent service of my F unit required labor, new speaker and time as well as shipping and insurance on both ends (Mine and thiers)
The post office probably made more net than BLI when the smoke cleared. Keep in mind I got my engine at a discount in a LHS who still made a small profit because the price was good.
Regardless of what I think BLI made on the unit in net profit I will still consider thier company for future motive power purchases. I use several strageties such as increasing hours at work and layaway to acquire items.
But the house comes first in everything and I can tell you that Walmart made a hell of alot more in profit than either the LHS's or retail hobby manufactors. This year our Walmart spending is less than 10% of last. Everything is making a "Profit" on the budget while eliminating debt.
For example cut fruits in a box already cooled costs about $5.60 at walmart. In Jacksonville AR they sold very rapidly while Cantelopes sat in the Pallet box nearby. We purchase the Cantelope for maybe 2 for a dollar at a local food store and process it on the kitchen counter with a knife instead of buying the prepackaged fruit. Im sure the local food store made a small profit.
The convience of pre-packaged fruit attracted people because they cannot or will not take time, knife and stand over the counter slicing cantelope and the associated cleanup. They are probably too busy in thier maxed out 24/7 lives, short on sleep and dont have time for actual work in the kitchen. So they throw 5 dollars at the small package while Walmart laughs to the bank.
I do prefer to purchase factory assembled engines with sound and DCC included. I figure that you can purchase a engine without sound or dcc and install these yourself. The cost of doing that probably approaches Factory units with the added danger of service calls and costs if there is a error in installation.
Walmart probably reports profits are down, expenses in energy up and a genearal lack of horsepower on the overall sales performance. But do we hear from the LHS's and Internet houses about profits and loss? No. If a store is doing well and has lots of business you can literally sense it. If they are not doing so well .. well.. they close fairly soon.
But will BLI report these items? Never heard of it. In fact Hobby makers generally dont make information public unless they got sued or filed bankrupcy or is bought out.
Regarding computers, you cannot compare between brands very well. I build my own machines several times a decade using OEM parts and can say that my cost to build the machine to a complete state and operating varies depending on what prices I pay in total for all of the parts and shipping.
The money I do save is the retail markup and the sales man hassle/pressure and associated stress in a big box computer store. None of that for me. Just a few clicks, enter a few numbers and wait on the Air Freight package. Assemble computer, boot install software and im in business. Bottom line: saving money? Not really. But my cost to a complete system at the work bench is pretty close to retail costs for similar systems.
Would I want to build computers for a living? No. Not worth the stress when customers come calling about this and that multiplied by whatever number of problem incidents are out there. Then you ask me why I like to build em? I say that I like to have powerful machines unencumbered by bundled software and problems. Knowing exactly what went into the computer gives me the freedom to fix it myself independant of the retailer.
I cannot always fix a DCC equipped loco so I rely on "GOOD" makers and thier service depts. Those that are able to provide a good experience survive. Others who fail will go out of business like Tyco did.
Dick,As far as retirement that will depend on several things to include retirement pay...I live on medical retirement through the union and the company I worked for.I can assure you it its a quite a few dollars more then Social Security SSI or DSS...We have members at the club on SS that still enjoys the hobby and can usually buy what they will but not as many as they did when working.
Now add the Blue Collar workers to your numbers-many leave those folk out but,locally we have more blue collar modelers then white collar-they are a buying force to be reckon with and the silent majority that votes with their wallets..
Think not Atlas started the Trainman line as entry level models no more then Athearn,Accurail,Walthers continue to build kits...These manufacturers knows the market better then we.They are tapping the limited budget modelers.
Jetrock wrote: As far as issues of Model Railroader goes, I have copies going back to around 1946-47, although it's more of a "spotty" collection of a few from each decade through the present day. A lot of the hobby really is "apples and oranges" when it comes to economics: how does one compare the price of a DCC-equipped unit with a DC locomotive from an era when DCC didn't exist? Exclude DCC entirely, or use the price of earlier non-standardized command control systems (hard to judge, as many were homebrew)? How does one compare a wood/paper Ambroid boxcar kit with a modern RTR boxcar? It's like comparing the price of computers: a home computer 25 years ago cost about the same as a home computer today, but comparing an Apple II or IBM PC with a modern Mac or Pentium-whatever isn't exactly a fair comparison.
As far as issues of Model Railroader goes, I have copies going back to around 1946-47, although it's more of a "spotty" collection of a few from each decade through the present day.
A lot of the hobby really is "apples and oranges" when it comes to economics: how does one compare the price of a DCC-equipped unit with a DC locomotive from an era when DCC didn't exist? Exclude DCC entirely, or use the price of earlier non-standardized command control systems (hard to judge, as many were homebrew)? How does one compare a wood/paper Ambroid boxcar kit with a modern RTR boxcar? It's like comparing the price of computers: a home computer 25 years ago cost about the same as a home computer today, but comparing an Apple II or IBM PC with a modern Mac or Pentium-whatever isn't exactly a fair comparison.
You make some excellent points and ones I hope we can address as this moves along. The "apples and oranges" comparison is actually a good one for this discussion. Both are fruits and if you are in the market for fruits, you certainly might be buying one or the other. The concept of "substitutes" is a key one for us in the hobby. Keep 'em coming!