How the internet leads to Apple riots...

A number of econ blogs, like scsu scholars and marginal revolutions are covering the Virgina Apple Riots. A Virginia school board decided to sell 1000 Apple iBooks (500mhz dual usb with a decent amount of RAM and OSX). They said they would sell them for $50, despite the fact that they go for around $350 on the eBay. Initially, they were going to go to anyone, but after complaints the city restricted it to county residents. Still, more people showed up than there were laptops, and violence ensued.

Econoblogs have correctly pointed out that this is what happens when you price below the market price. People subsititute time waiting outside for the chance to buy at a below-market price, and VA leaves a bunch of money on the table.

But I think part of the reason for this is a little thing called the internet. When Henrico County posted this on their website, lots of other sites found out. I found about it on this lengthy post on FatWallet. I briefly considered going (before it was restricted to VA residents) but then decided it wasn't worth the effort and taking off from work. But if I was still a college student or a night worker, I might have done it.

Of course, the time/free stuff tradeoff isn't a big surprise to anyone who has ever taken part in the tradition known as Black Friday on the day after thanksgiving. Many stores (Best Buy is especially known for this) will have early-morning doorbuster sales, with items well below normal prices - but they will only have a couple of each item. People will camp outside stores overnight for this stuff. There is a hierarchy - if you want a $100 computer, plan on camping overnight, but if you want free after rebate blank cd's, you can probably roll up a few minutes before they open (usually 6am) and get what you want.

Grand opening sales are often the same way - I'm typing this while sitting on a leather POANG chair from Ikea, which I camped out for when they opened their store in College Park, MD and gave away 100 chairs at all three Baltimore/DC locations. CompUSA has occasionally given away laptops at grand openings, and people have camped out there for days to get them.

But part of the phenomena relates to the internet, and how it's changed bargin hunting. Deal sites like FatWallet make it easy to find clearance items, and stores that sharply mark down items find hunderds of people coming for the 1 or 2 of that item they have in stock. Office Depot has seen this recently after they clearanced a bunch of laptops for 50% off, leading to some annoyed OD workers at forums for retail workers.

Before the internet, Henrico County would have posted an ad in some newspaper, and a few people would have seen it. But thanks to the internet, and the way news spreads quickly on it, Henrico got mobbed. It's not only a less on market-clearing prices, but also on the power of the internet and it's powerful effect on pricing.