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?
ereimer wrote:sounds interesting . if you decide to go ahead with it i have almost all issues of MR from present back to 1985 (and a few back as far as 1977) and can look up both manufacturer list price and the mail order ad prices on items for your comparisons
Excellent. That will be very helpful as this moves forward.
Thanks.
andrechapelon wrote: My degree's in Economics too, and there's only one absolute truth in Economics: If all the Economists in the world were lined up in a row, they still wouldn't reach a conclusion And in any case, why would such an endeavor change anyone's mind? I remember some right wingnut who was complaining about his income taxes on a different forum. This particular person got into an argument with a CPA who specialized in taxes. It didn't matter that the CPA had the facts on his side. It didn't matter that it was amply demonstrated that the original poster had no idea at all how the Federal income tax worked. It didn't matter that his math sucked All that matter to the original complainer was his sense of victimhood. The facts don't matter to anyone whose lifelong outlook is that he/she is a victim (most often of a conspiracy). Andre
My degree's in Economics too, and there's only one absolute truth in Economics:
If all the Economists in the world were lined up in a row, they still wouldn't reach a conclusion
And in any case, why would such an endeavor change anyone's mind? I remember some right wingnut who was complaining about his income taxes on a different forum. This particular person got into an argument with a CPA who specialized in taxes. It didn't matter that the CPA had the facts on his side. It didn't matter that it was amply demonstrated that the original poster had no idea at all how the Federal income tax worked. It didn't matter that his math sucked All that matter to the original complainer was his sense of victimhood. The facts don't matter to anyone whose lifelong outlook is that he/she is a victim (most often of a conspiracy).
Andre
Andre,
I couldn't agree more. I'm not out to change anyone's mind who has a hardened position. In fact, I'm not out to change anyone's mind at all. I'm just interested in having a discussion that might help those without strong (any?) opinions on the subject to understand this market better and to possibly help them make better decisions moving forward. If somebody changes their mind about vendors or the hobby's fate, so much the better but I won't hold my breath!
WickhamMan says:
As a trained economist, I think it would be interesting to explore this question more formally. Using the tools/methods of economics would, I think, give a more robust answer to the question than the anecdotal “Well I paid X in 1960 for a Y and now it costs Z” arguments. Would anyone be interested in reading and participating in such an endeavor? I would need the help of some of you to collect a few data points and some opinions. None of this would entail formal research on your parts but the tutorial might get a bit into economic theory.
Ed, I hope you don't mind my opinion, but I think it will have limited appeal, and those who don't like the way it seems to be going will soon become vociferous opponents of either your method, your information, the opinions submitted on which you will be basing your work, and so on.
As stated above, those who argue for or against the various conclusions that have stemmed from previous debates are unikely to overtly change their positions due to face-saving issues, no matter what you and I conclude from the information we use.
However, let it not be said that I am not curious...
As I mention time and again of late the BEST PRICE BUSTERS we have is our computers.Yet folk simply can't accept that fact.Listen even buying one high dollar locomotive including shipping is still less then full price at your LHS.
There are deals to be found on the net prices even lower then the famous e-bay auction prices of the last few months.
See for yourself and then judge for yourself if you can still afford the hobby.
http://www.firsthobby.com/store1/default.asp
http://www.1stplacehobbies.com/default.asp
http://www.toytrainheaven.com/
And the cream of the top.
http://www.modeltrainstuff.com/index.html
There are several more like these but,I have use these shops and know the quality of their service.
I fully believe the economics will speak volumes for on line shopping if one chooses to study the above list of shops..
Larry
Conductor.
Summerset Ry.
"Stay Alert, Don't get hurt Safety First!"
It appeares that when some of us get tired of the train room and its challenges, "discussing" imposible issues is a good distraction. Your suggestion of a new version might interest some.
I am curently sitting in hotel waiting for my wife to get her hair done. I would love to debate something that I have no control over, though stem cell research sounds more interesting. Sunday we finaly get on the Empire Builder. That will be more interesting. When I am back we can debate whether they got the paint sceme close to the prototype.
I really wish I had a good Ambroid kit along to work on.
Dave Vollmer wrote: I'm not sure that would help, any more than a debate on abortion, war, or stem cell research is likely to change anyone's minds. My impression from the aforementioned threat (it just won't die!!!) is that the sides are so entrenched, it may be best to leave it alone. Seems to me we have the best selection of the highest-quality products this hobby has ever had (or at least in the 20+ years I've been in it) yet some people don't want to pay more for it. Some want P2K quality at Tyco prices. Not sure even an economist can unbefuddle that kind of warped expectation.
I'm not sure that would help, any more than a debate on abortion, war, or stem cell research is likely to change anyone's minds. My impression from the aforementioned threat (it just won't die!!!) is that the sides are so entrenched, it may be best to leave it alone.
Seems to me we have the best selection of the highest-quality products this hobby has ever had (or at least in the 20+ years I've been in it) yet some people don't want to pay more for it. Some want P2K quality at Tyco prices. Not sure even an economist can unbefuddle that kind of warped expectation.
Dave,
You make some good points. I'm not particularly interested in changing opinions in this area. I'm more in the education realm and hope to give forum members who haven't formed hardened opinions the tools to looks at what is happening in the hobby and, potentially, make more informed decisions going forward. This is a very interesting market that faces competitive, technological and demographic challenges. Understanding how these factors impact prices and options would, I think, be useful.
grayfox1119 wrote:Very interesting suggestion Ed. I was too young and too poor to buy anything way back in the 40's and 50's, or even 60's for that matter. However, I think that the real issue is the amount of money that people have available to them to spend on this hobby, as opposed to COL increases over the years.
Interesting theory. It will be interesting to see if a more formal analysis bears that out.
Modeling the Rio Grande Southern First District circa 1938-1946 in HOn3.
I’ve been reading a lot of discussion over the past several years on this forum about the costs associated with this hobby. One recent thread comprised nearly 300 responses! Many have the impression that the hobby is getting too expensive. Others have the opinion that the hobby is getting cheaper. Finally, others tend to compare this hobby with other hobbies to show how expensive or inexpensive it is.
We might be able to get to the root of the question of whether the hobby is getting "too expensive" and, more importantly, why?
Any interest?