Market Equilibrating Process Paper
E-reader market evolution started in late 2007 when Amazon releases its e-reader device named Kindle (RTT, 2010). Kindle is a mobile reading device connects to Amazon library through 3G network to download books, magazines, newspapers, personal documents. Kindle will then display those papers electronically to its black and white screen (RTT, 2010). In this paper we will cover the market equilibrating process of e-reader devices and how Amazon adjusts its price to increase revenue.
After the tremendous success of Kindle in 2007, Citigroup analyst predict Amazon revenue to be between $400 million and $750 million from selling Kindle by 2010, and 1% to 3% of Amazon’s total revenue will come from Kindle (Michael, 2008). Amazon priced the Kindle at $399, and to attract more buyers Amazon reduced the price to $359 to increase demanded quantity and therefore increase revenue. Because Kindle is elastic product, reducing its price will increase the demanded quantity that will increase the total revenue of the firm (Campbell R, Stanley & Sean, 2009).
In 2008, after one year of first release of Kindle, the demands were very high. Kindle was out of stock for 2 to 3 weeks (Glenn, 2010). Amazon did not reduce the price of Kindle however consumer believes the price of $359 - $399 is a cheap price and this explain the increase in demand. The $359 price was the equilibrium price in which consumers are willing and able to purchase and Amazon was willing and able to make product available for sale (Glenn, 2010).
This success was challenged by competitions, change consumer tastes and advance technology. Even though “Amazon sold at least 2 million Kindles in 2009, accounting for about 70% of all e-reader sales” (Kunr, 2010) it loses some of its market share. Barnes & Noble launched e-book reader device named Nook in October 2009. Nook comes with 6-inch color screen and like the Kindle; the Nook has a built-in 3G wireless connection and a built-in Wi-Fi adapter. One of the
After the tremendous success of Kindle in 2007, Citigroup analyst predict Amazon revenue to be between $400 million and $750 million from selling Kindle by 2010, and 1% to 3% of Amazon’s total revenue will come from Kindle (Michael, 2008). Amazon priced the Kindle at $399, and to attract more buyers Amazon reduced the price to $359 to increase demanded quantity and therefore increase revenue. Because Kindle is elastic product, reducing its price will increase the demanded quantity that will increase the total revenue of the firm (Campbell R, Stanley & Sean, 2009).
In 2008, after one year of first release of Kindle, the demands were very high. Kindle was out of stock for 2 to 3 weeks (Glenn, 2010). Amazon did not reduce the price of Kindle however consumer believes the price of $359 - $399 is a cheap price and this explain the increase in demand. The $359 price was the equilibrium price in which consumers are willing and able to purchase and Amazon was willing and able to make product available for sale (Glenn, 2010).
This success was challenged by competitions, change consumer tastes and advance technology. Even though “Amazon sold at least 2 million Kindles in 2009, accounting for about 70% of all e-reader sales” (Kunr, 2010) it loses some of its market share. Barnes & Noble launched e-book reader device named Nook in October 2009. Nook comes with 6-inch color screen and like the Kindle; the Nook has a built-in 3G wireless connection and a built-in Wi-Fi adapter. One of the
References: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn , 2009. Economics Principles, Problems, and Policies, Eighteenth Edition Glenn Chapman, 2010. Kindle and Nook cut prices in battle with iPad Retrieved June 23, 2010 from http://newsinfo.inquirer.net/breakingnews/infotech/view/20100622-276934/Kindle-and-Nook-cut-prices-in-battle-with-iPad Kunr Patel, 2010. The Kindle Market Is "Too Small" For iPhone Retrieved June 23, 2010 from http://www.businessinsider.com/the-kindle-market-is-too-small-for-iphone-developers-2010-1#ixzz0rngh2kBD Michael Arrington, 2008. Amazon May Sell $750 Million In Kindles by 2010 Retrieved June 23, 2010 from: http://techcrunch.com/2008/05/14/amazon-may-sell-750-million-in-kindles-by-2010-thats-a-lot-of-kindles/ RTT, 2010 . Amazon Slashes Kindle Price To $189 In E-reader Price War Retrieved June 23, 2010 from http://rttnews.com/articleview.aspx?id=1339833