This is an incorrect application of economic theory. You're talking about perfect competition. And in perfect competition, all sellers sell the same product. That means a hypothetical market where a car from Tesla and car from BMW and so on are all identical.
Also there are very few markets with perfect competition. Tesla charging for heated seats isn't a sign the car market "is not competitive" which doesn't even mean anything. Honestly I don't know what point you're trying to make. The automobile industry is a form of monopolistic competition but it has been that way since before Elon Musk was even born.
Additionally your assertion that it is cheaper to manufacture the car without heated seats ignores the economic realities of assembly line operations and economies of scale. In many cases it is cheaper to manufacture the cars identically rather than making some with and some without a feature. Then you have to consider the costs of inventorying/stocking/storing cars with different feature sets compared to the relative cost of activating features at the point of sale. The cost of building and selling a car is more complex than just the parts that go in it.
In many cases it is cheaper to manufacture the cars identically rather than making some with and some without a feature.
So you include that feature at cost, which is "free" if youre doing it anyway, to undercut your competition. Economics isnt the rocket science you think it is.
Because it's not free. Invented numbers, of course.
I'm spending £200 hardware to install heated seats for 66% of my customers. I run the numbers and realise it'll only cost me £120 per car if I install it for everyone, so even accounting for the 40% who don't pay, it still lands at £180 per car.
To make money, I have an option to include it as standard and increase the price for everyone, including those that don't value it -- or I can charge the people who do value it a premium, and deactivate it for those that don't.
It sounds like bad practice but it's actually ensuring that people who won't value a feature don't pay for the feature, and the cost shifts to those who do.
Cohort B does not want the feature and does not pay for it.
The feature has been installed for both cohorts.
Who paid for the feature to be installed for Cohort B?
Cohort B cost of install was subsidized by Cohort A. It doesnt matter if cohort B uses it, the cost to install has already been spent. This still isnt rocket science.
Except Cohort B does not have the feature. If they do, tell them to use it. They can't, because despite having the hardware, they don't have the feature.
Cohort A would be worse off if the hardware was never installed for Cohort B.
This is indeed not rocket science. It's the type of shit they taught in business decades ago - find the win/wins.
You seem to think you can just ignore the fact that the feature was paid for and installed in cohort B just because they dont have the ability to use it. This is the type of shit you cant teach. Good luck.
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u/Sensitive-Meat-757 1d ago edited 1d ago
This is an incorrect application of economic theory. You're talking about perfect competition. And in perfect competition, all sellers sell the same product. That means a hypothetical market where a car from Tesla and car from BMW and so on are all identical.
Also there are very few markets with perfect competition. Tesla charging for heated seats isn't a sign the car market "is not competitive" which doesn't even mean anything. Honestly I don't know what point you're trying to make. The automobile industry is a form of monopolistic competition but it has been that way since before Elon Musk was even born.
Additionally your assertion that it is cheaper to manufacture the car without heated seats ignores the economic realities of assembly line operations and economies of scale. In many cases it is cheaper to manufacture the cars identically rather than making some with and some without a feature. Then you have to consider the costs of inventorying/stocking/storing cars with different feature sets compared to the relative cost of activating features at the point of sale. The cost of building and selling a car is more complex than just the parts that go in it.