The Economics of the HDMI Cable Ripoff(marginalrevolution.com)
marginalrevolution.com
The Economics of the HDMI Cable Ripoff
http://www.marginalrevolution.com/marginalrevolution/2009/06/the-mysterious-hdmi-cable-ripoff.html
7 comments
"The author doesn't mention the concept of anchoring."
Maybe the article has changed since you read it, but:
"The second puzzle is, Why don't any stores stock cheap HDMI cable? I knew cables were a ripoff yet I could not find reasonably priced cables at Best Buy, Radio Shack, Target or even Wal-Mart. Ordinarily, we would expect competition to push prices down but in this case it seem as if the mere existence of Monster is anchoring high prices everywhere but online."
Maybe the article has changed since you read it, but:
"The second puzzle is, Why don't any stores stock cheap HDMI cable? I knew cables were a ripoff yet I could not find reasonably priced cables at Best Buy, Radio Shack, Target or even Wal-Mart. Ordinarily, we would expect competition to push prices down but in this case it seem as if the mere existence of Monster is anchoring high prices everywhere but online."
HDMI is digital and component (with "RCA" connectors) is analog. Why do you prefer analog to digital for video transmission? Unfortunately, yes, HDMI has HDCP. I try to use DVI or mini-DVI where possible.
DVI can carry HDCP just fine. In fact, if you have a recent desktop display with a DVI port, there's a good chance it has HDCP. And if you're running a recent version of Windows with a recent graphics card, there's a good chance you're actually using it without realizing it.
In practice I've found that the quality from component cables is just as good as HDMI, even if it is analog.
If everything's working fine with both cables, there is no appreciable quality different between digital and analog.
I try to use DVI or mini-DVI where possible.
Hear hear, in fact I refuse to buy anything that won't accept proper computer inputs. Which reminds me - any TVs have DisplayPort yet?
Hear hear, in fact I refuse to buy anything that won't accept proper computer inputs. Which reminds me - any TVs have DisplayPort yet?
DVI is easily connected to HDMI using a DVI-HDMI cable. I've had no problems doing this with a computer and an HDTV at 1080p resolution.
If the stores sell literally nothing but the expensive cables, is this anchoring, or is it simply cartel pricing? You need the cable to use the player, and nobody wants to wait 3 days after they make an impulse purchase to actually use it.
From an economics standpoint, shouldn't they be selling everything they can at the maximum it will sell for?
If people stop buying cables because they are too expensive, then I would assume prices would drop.
If people stop buying cables because they are too expensive, then I would assume prices would drop.
Prices already have dropped. The retail stores simply won't stock the low-priced products.
If I were running a retail store, I wouldn't stock the low-priced ones either. I would imagine they've got a lower profit margin, and HDMI cables don't go bad frequently enough to count on someone purchasing cables on a regular basis. Might as well charge as much as they'll spend on the rare occasion that the cables get sold. There is a finite amount of space in a retail location, so there has to be an expected return on value for every inch of real estate.
It doesn't have to be either/or. It can be both anchoring and cartel pricing.
Anchoring doesn't seem to account for the effect here.
Anchoring (another term is mental accounting) says that when the price range of an object is high, consumers don't mind a $1 change in price as much as when the prices are low. But this doesn't explain why stores wouldn't just charge $1 more for the base system, versus stuffing it into profits on the cable.
At least part of the effect seems to be from consumers merely not accounting for the cost of the cable when deciding when to buy the TV.
As mentioned in the article, its very similar to why printers are cheap but ink is expensive, and why credit cards advertise great features and profit on high hidden fees. When consumers pay a great deal of attention to a certain sticker price, that sticker price will fall and stores will stuff profits instead into areas when consumers don't think as much about.
At least part of the effect seems to be from consumers merely not accounting for the cost of the cable when deciding when to buy the TV.
As mentioned in the article, its very similar to why printers are cheap but ink is expensive, and why credit cards advertise great features and profit on high hidden fees. When consumers pay a great deal of attention to a certain sticker price, that sticker price will fall and stores will stuff profits instead into areas when consumers don't think as much about.
I think the first comment on the article has a decent explanation:
"How about differences in price elasticity?
We know that demand for big ticket items are very price-elastic, so they price those items very competitively. But, given that you're already in the store buying something, you may have inelastic demand for the peripherals that you didn't know you needed to buy (or, you didn't know that it wasn't included)."
People will drive to another store to save money on a television; they spend their effort comparing these prices. Once they're buying a television from a store, they're (usually) not going to then drive to another store to compare cable prices; they're going to buy the cable at the same store they buy the tv at.
"How about differences in price elasticity?
We know that demand for big ticket items are very price-elastic, so they price those items very competitively. But, given that you're already in the store buying something, you may have inelastic demand for the peripherals that you didn't know you needed to buy (or, you didn't know that it wasn't included)."
People will drive to another store to save money on a television; they spend their effort comparing these prices. Once they're buying a television from a store, they're (usually) not going to then drive to another store to compare cable prices; they're going to buy the cable at the same store they buy the tv at.
Yeah, but the "anchoring" argument falls apart when a Blu-ray player is $300 and Monster's top-end 16' cable is $225, both at Best Buy.
Who the hell buys a 16 foot HDMI cable?
I have a couple. They're good for hooking a laptop up to a TV from across the living room, or hooking up a game console to a monitor on your desk when you don't want the console anywhere near your desk.
Of course, I buy the $12 monoprice variant :)
Of course, I buy the $12 monoprice variant :)
Hrm, that's a good use I suppose. Never used one in that way though.
Excuse my mood, shouldn't be commenting today I suppose.
Excuse my mood, shouldn't be commenting today I suppose.
Anyone with an HD projector, such as myself. In fact, I use a 10m (33') cable - which cost me only €25, despite being heavily shielded. (it's over 1cm/~½" thick)
My most recent home cable box (a Moto from Cox) will only output 720p to our TV via HDMI - component cables force to 480p, FWIW.
That's an imposed limitation, not a limitation of the various cabling. Component cables readily support up to 1080i signals. Personally I use HDMI because I prefer the single plug and the all-digital signal path but I do agree that HDCP is a crock. I don't think that HDMI vs. DVI-D is a truly valid issue though - the formats are electrically compatible. If your TV has support for 0-255 RGB signals it doesn't matter which physical plug you are using.
It's also worth noting: component output is downsampled for DRM-sake. HDMI devices are actually authenticated before full resolution content is supplied to them. As far as I know, it is not possible to authenticate devices over component, hence 480p. Not exactly for technical reasons, more related to the whole licensing scheme around HDMI.
Good point. Still, my Xbox 360 is perfectly happy pumping out my video games in 1080i over component. Admittedly I don't watch very much studio-restricted content.
Interesting, thanks for the clarification.
The reason I use HDMI is that it's a single cable that handles video and audio. I can plug in my notebook with a fairly thin cable and use my LCD TV as a second display. I've never had any issues with the onscreen menus but I don't think I'm outputting HDCP from my notebook.
From the comments:
I know, from personal experience (my dad has a setup), that on sufficiently high end systems (tube amps, premium quality vinyl records, $5000 turntables), the cables make a difference. Some of the cables are hand made, and have markets of less than 1000 buyers. They really do sound different though.
Woohoo, expectation bias in action.
Back on topic, a neat trick is to go to your friendly low margin neighbourhood computer store; they tend to have every cable you could possibly imagine for $10 or less.
I know, from personal experience (my dad has a setup), that on sufficiently high end systems (tube amps, premium quality vinyl records, $5000 turntables), the cables make a difference. Some of the cables are hand made, and have markets of less than 1000 buyers. They really do sound different though.
Woohoo, expectation bias in action.
Back on topic, a neat trick is to go to your friendly low margin neighbourhood computer store; they tend to have every cable you could possibly imagine for $10 or less.
> a neat trick is to go to your friendly low margin neighbourhood computer store; they tend to have every cable you could possibly imagine for $10 or less.
Wow, I wish I had a friendly low margin computer store in my area. Other than Best Buy and the recently-defunct CompUSA, the only computer stores around are mom'n'pop stores that charge more markup on everything than NewEgg, MonoPrice, and even Walmart...
Wow, I wish I had a friendly low margin computer store in my area. Other than Best Buy and the recently-defunct CompUSA, the only computer stores around are mom'n'pop stores that charge more markup on everything than NewEgg, MonoPrice, and even Walmart...
Ha, mine are mom'n'pop stores too, but they're Chinese in a fairly Chinese area, with other computer shops around .. price sensitive market + good competition = I am happy. I love that kind of shop actually; they act as these little value-added distribution branches. Order heaps of the top 100 (or so) products, add 5-10% to the wholesale price, then they walk out the door.
The bad side is that we actually don't have a big internet electronics retailer here (Australia). A Newegg would probably be cheaper - I thought they were very cheap? But they would have difficulty starting, since they'd rely on volume to beat the small operators, but the small ones do a pretty good job and can sell minus shipping .. wouldn't want to try to compete with them unless I had very deep pockets.
Seems I told a lie though, just looked it up and it's actually more like AUD$15 (USD$12-13) for HDMI. Sorry : /
The bad side is that we actually don't have a big internet electronics retailer here (Australia). A Newegg would probably be cheaper - I thought they were very cheap? But they would have difficulty starting, since they'd rely on volume to beat the small operators, but the small ones do a pretty good job and can sell minus shipping .. wouldn't want to try to compete with them unless I had very deep pockets.
Seems I told a lie though, just looked it up and it's actually more like AUD$15 (USD$12-13) for HDMI. Sorry : /
What's the incentive for a retailer to offer the cheap HDMI sales? When deciding where to shop, people are influenced by the "sale price" on the Blu-Ray player, not the cables-- and most Blu-Ray player purchasers are not going to walk out of the store without a cable. So, might as well hook them for the over-priced one.
Yeah - likewise, if I've already spent $400 on a player, the sales pitch "you've made such a good investment in this piece of equipment, why ruin it all with cheap cabling" seems to sell itself.
Couldn't it also work the other way round, though? "Hey, they rip me off over the cables, maybe their players are not the cheapest ones either"?
We must also consider the fact that big box stores rarely make good margins on high-end purchases. It is the small things like cables and accessories where they have high profit margins to make up for selling larger appliances at very low margins.
I normally would never pimp a product or site on HN. However I'm going to take this chance to talke about RiteAV (http://riteav.com).
RiteAV is probably the BEST source I've ever found for cables and adapters. Everything I've purchased has been of great quality and very inexpensive. I've placed several orders and they were all shipped same day. What's better is that shipping costs are super-cheap (they'll even ship via first class mail if it makes sense). In my last order I got 2 cables and an adapter for $6 + shipping ($6.50).
Don't take my word for it: google them. They seem to have amazing reviews elsewhere: http://www.resellerratings.com/store/RiteAV
Note: I'm not affiliated with RiteAV outside of the purchases I've made and they're not paying me for this. The only reason I'm writing this is because they seem like good people.
RiteAV is probably the BEST source I've ever found for cables and adapters. Everything I've purchased has been of great quality and very inexpensive. I've placed several orders and they were all shipped same day. What's better is that shipping costs are super-cheap (they'll even ship via first class mail if it makes sense). In my last order I got 2 cables and an adapter for $6 + shipping ($6.50).
Don't take my word for it: google them. They seem to have amazing reviews elsewhere: http://www.resellerratings.com/store/RiteAV
Note: I'm not affiliated with RiteAV outside of the purchases I've made and they're not paying me for this. The only reason I'm writing this is because they seem like good people.
Let's just start with the simple fact cable quality does matter when working with HDMI. I'm not here to argue about the price of one manufacturer versus another, or their relative quality and worth. But I will point out that "cheap cables" and the expectation that for the same $9.99 you'd spend on a serial cable you could get a reliable HDMI cable is somewhat laughable.
HDMI is really bad design, and due to its DVI legacy they've pushed the up against the limits of what is possible. Right up against the limit.
1) it's twisted pair technology instead of coax 2) it's parallel instead of serial 3) it's very fast (10.2 Gbps)
If you just spent money on a new 7.1 AVR, and a Deep Color Blu-ray player then you'll be needing cables that have been manufactured and tested to a highest HDMI 1.3 standard. Resistance, skin effect, impedance, capacitance, cross talk and inductance all conspire to disrupt the data and since it's digital, you will be left staring at a black screen or hearing pops and audio dropouts. This kind of quality control is not cheap, and is much more than a simple continuity check on each line within the bundle.
I've tested some really expensive HDMI cables and seen what is possible with them. I've ignored the "Direction of Flow" arrows on some long lengths and had them fail, reversed the cables and had it work. There is real engineering that goes into these things, and that is what you are paying for.
So for short lengths (3-6') the cheapest HDMI cable might be good enough, and you will probably be happy. But I'd still be looking for the HDMI 1.3 logo on the package, at least then you can be sure it has been tested against the upper ends of the spec.
HDMI is really bad design, and due to its DVI legacy they've pushed the up against the limits of what is possible. Right up against the limit.
1) it's twisted pair technology instead of coax 2) it's parallel instead of serial 3) it's very fast (10.2 Gbps)
If you just spent money on a new 7.1 AVR, and a Deep Color Blu-ray player then you'll be needing cables that have been manufactured and tested to a highest HDMI 1.3 standard. Resistance, skin effect, impedance, capacitance, cross talk and inductance all conspire to disrupt the data and since it's digital, you will be left staring at a black screen or hearing pops and audio dropouts. This kind of quality control is not cheap, and is much more than a simple continuity check on each line within the bundle.
I've tested some really expensive HDMI cables and seen what is possible with them. I've ignored the "Direction of Flow" arrows on some long lengths and had them fail, reversed the cables and had it work. There is real engineering that goes into these things, and that is what you are paying for.
So for short lengths (3-6') the cheapest HDMI cable might be good enough, and you will probably be happy. But I'd still be looking for the HDMI 1.3 logo on the package, at least then you can be sure it has been tested against the upper ends of the spec.
I've ignored the "Direction of Flow" arrows on some long lengths and had them fail, reversed the cables and had it work. There is real engineering that goes into these things
You're bullshitting us. At least, I hope you are, otherwise you are sadly misguided. There is no way in hell you can design a cable in such a way that it will pass signals in one direction, but not in the other.
Resistance, skin effect, impedance, capacitance, cross talk and inductance all conspire to disrupt the data
You're just repeating electrical engineering terms without understanding them. Impedance is the combined effect of resistance, capacitance and inductance. The skin effect is an effect that adds to the resistance.
They all don't 'disrupt' the data. In the simplest terms, the resistance influences the amount of power required to transfer a signal, due to losses in the cable. The capacitance influences the amount of time required to transfer a signal, because it may be viewed as the resistance to signal change. Inductance is the only one that may change the signal, but it only influences AC signals, which, at most, act as the carrier for a digital signal. It doesn't change the digital signal.
The fact that Infiniband cables are cheaper than these kind of HDMI cables should also be recognized as a large red neon sign screaming: you're being scammed.
You're bullshitting us. At least, I hope you are, otherwise you are sadly misguided. There is no way in hell you can design a cable in such a way that it will pass signals in one direction, but not in the other.
Resistance, skin effect, impedance, capacitance, cross talk and inductance all conspire to disrupt the data
You're just repeating electrical engineering terms without understanding them. Impedance is the combined effect of resistance, capacitance and inductance. The skin effect is an effect that adds to the resistance.
They all don't 'disrupt' the data. In the simplest terms, the resistance influences the amount of power required to transfer a signal, due to losses in the cable. The capacitance influences the amount of time required to transfer a signal, because it may be viewed as the resistance to signal change. Inductance is the only one that may change the signal, but it only influences AC signals, which, at most, act as the carrier for a digital signal. It doesn't change the digital signal.
The fact that Infiniband cables are cheaper than these kind of HDMI cables should also be recognized as a large red neon sign screaming: you're being scammed.
There is no way in hell you can design a cable in such a way that it will pass signals in one direction, but not in the other.
Did someone just uninvent the diode?
Did someone just uninvent the diode?
I was coming at the problem from a sane angle and meant that there was no way in hell that you could design a cable in such a way if you were simply trying to design the best possible cable.
If you are suggesting that Monster seperates each of the wires in its cables into multiple parts and connects them with electronic components emulating a diode (you couldn't just put a diode in; that would screw up the cable), then yes, it could be done. It would be an insane way to actually let the directional arrows make sense, but granted, when taken literally, my original statement was wrong.
If you are suggesting that Monster seperates each of the wires in its cables into multiple parts and connects them with electronic components emulating a diode (you couldn't just put a diode in; that would screw up the cable), then yes, it could be done. It would be an insane way to actually let the directional arrows make sense, but granted, when taken literally, my original statement was wrong.
I just bought an upscaling DVD player for my son because I was tired of wiping down the PS3. The cheapest one came with DVD player, quick start guide, remote and batteries. Cables?? you're gonna pay extra for that. Of course the retailer had only the most expensive cables (it didn't matter, component, composite, HDMI) in stock. And since I was going to tell my son he was going to have to wait up to a week before he could watch his movies I felt compelled to buy the heavily marked up cables in the store.
Fact is cables are the new print cartridges. I won't be surprised when CE devices only come with a proprietary power cable.
Fact is cables are the new print cartridges. I won't be surprised when CE devices only come with a proprietary power cable.
Good thing they don't "run out". If you just had some extra, cheap HDMI cables or component cables lying around, you'd have been set. I'll keep that in mind as I buy some HDMI cables soon for my upcoming HDTV purchase.
A $40 HDMI cable sounds expensive.
But when you're buying a $400 bluray player, another $40 for the cable doesn't sound so expensive, because you're mentally comparing the price to $400.
Anchoring is a well-known concept in pricing. Since retail stores are almost always selling HDMI cables as add-ons, they can take advantage of a much greater willingness to pay by customers who are anchored by the high-price blu ray player they're buying. The online stores that sell cheap HDMI cables (monoprice FTW!) sell ONLY cables and can't anchor.
PS I always prefer component cables to HDMI cables. You get the same quality without the copy protection bullshit. There are too many reasons the HDCP DRM crap sucks, for example, it is impossible for AV receivers to display on-screen menus or even on-screen volume sliders so you have to adjust your volume without seeing what you're doing.