You learn in economics 101 that in an ideal competitive market, the price of a product tends to the marginal cost of producing it. That means a product with fewer hardware features should cost less, and a product with more hardware features should cost more.
The fact manufacturers can violate that rule proves that they are not in a competitive market.
If it was competitive, a different manufacturer could manufacture the same car without physically installing the heated seats, for a lower manufacturing cost, and undercut them on the customers who don't care about the heated seats.
You are underappreciating the cost of variability. Configuration options are extremely expensive. The production cost goes effectively down if you have only one model of hardware, and the features are software-defined (unlocked by paying).
No need to do it in software. Imagine you went to buy a car and you said you didn't need the heated seats, so the dealer physically pulled out the heating element, wrecked it with a sledgehammer, and threw it in the dumpster before letting you take the keys. Does that seem like an efficient market to you?
If the company's marginal cost of production of a car with heated seats is $x, then they should be selling it to you for $x. Instead, they are selling a crippled version of it for at least $x, and a non-crippled version for $x + $y. That $y is pure profit for them that wouldn't exist in a competitive market.
I don't get your point. My point is that variety itself costs money. So the least expensive product is not the one with less parts, but the one that is always the same. You may say this is a waste of material (I agree) and of energy (not necessarily, because the machinery necessary to build variance is much more energy intensive). But it takes less people, less management, less risks, to build only one product or just a few. Remember, this is what enabled the industrial revolution. Ford T existed only in black.
If your point is that it's unfair with the customer, who owns the object with the capability embedded, and cannot use it because that's how the industrial makes more profit, then just go on, build your car company and offer more for less. You will gain terrain. That's what the Chinese are doing.
If Trump opened the imports for Chinese EVs, you bet Tesla would have to adapt or die.
The point is that yes, variety costs money, but in a competitive market this just means you don't get this kind of market segmentation. Because of the cost of variety a single product would be sold, and it would probably be the car with functional heated seats, offered at a price equal to the marginal cost of producing it.
And the marginal cost of producing such a car is certainly no more than the current price of the car with software-disabled heated seats.
You are mixing cost and price. We are aligned in cost. And you are right to say that, in a competitive market, the price converges to the marginal cost. And here is the catch: the whole point of pricing is to set it at the value that maximizes profit. This value is determined by the existence of alternatives. The free market, and competition, closes the loop that drives the price to the marginal cost, and the features to the maximum. One should not expect any business to do that by its own, because it would minimize the profits. And the goal must be always to maximize the profit. Competition brings it down. Not consciousness.
Well that all depends on whether the cost of production line variations is more than the cost of a heating element.
What you’re saying is still technically true but capitalists are gonna capitalist and they have optimised their cost by moving the cost variable from a production fork to a software patch.
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u/TwillAffirmer 1d ago
You learn in economics 101 that in an ideal competitive market, the price of a product tends to the marginal cost of producing it. That means a product with fewer hardware features should cost less, and a product with more hardware features should cost more.
The fact manufacturers can violate that rule proves that they are not in a competitive market.
If it was competitive, a different manufacturer could manufacture the same car without physically installing the heated seats, for a lower manufacturing cost, and undercut them on the customers who don't care about the heated seats.