How My Blu-Ray Paid Off
I took the plunge and bought a Blu-ray player Monday, on sale at $300 instead of the $600 list. Since $300 was my reservation price, I derived no consumer surplus. But its absence was made up for when I logged onto Netflix to receive Blu-ray instead of DVD disks in the mail. For only $1 extra per month, I get Blu-ray automatically in my Netflix queue. Much less than I expected to pay; and my friends tell me that until recently there was no extra charge for Blu-ray. That’s surprising, since I assume Blu-ray disks cost more to make; and I’m sure that Blu-ray owners have higher incomes and lower demand elasticities. This worries me: Is Netflix going to keep raising the Blu-ray surcharge to extract more consumer surplus from people like me? Or are there sufficient competitors for home-shown movies (on-demand TV, store rentals, and others) to prevent increased price discrimination? I certainly hope so!