In the News

Demand and Supply in Action: Sony raises prices of PlayStations in the UK by 6%

Geoff Riley

25th August 2022

Sony has raised the UK price of their PS5 console by 6% (£30), from £449.99 to £479.99.

They blame the price hike on rising production costs allied to persistent supply shortages in their global supply chain.

Here is another interesting example of price elasticity of demand in action. To what extent are PlayStation customers price sensitive? Will a £30 price rise have a significant impact on sales in the next few months?

Many of course will have already made a purchase of the console. It will be interesting to see if the price rise leads to a reduction in replacement demand and sales to new customers.

The wider macroeconomic situation will play a role - real wages are falling and millions of families are struggling to make ends meet as energy and food bills soar. To what extent is the purchase of a console or a game subscription a discretionary / luxury purchase at the present time? And is demand starting to tail off after a boom in sales during lock-down?

This article from the Guardian also mentions the influence of the grey market in PlayStation consoles. A new, sealed PS5 can fetch in excess of £600 on eBay as “price scalpers” race to buy consoles at the recommended retail price whenever they are available and then try to make a profit via eBay.

There is a notable shortage of PS5's globally - and excess demand is often a reason for businesses to raise their prices to make higher profits.

PlayStation 5 was released by Sony in November 2020. The PlayStation 5 console has sold 20.65 million units as of July 2022.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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