Yesterday a door to door salesman from Time Warner Cable came to our door. He was a nice guy so I listened to him even though I've been avoiding cable for a long time. Anyway here are the current options for Internet access from Time Warner Cable:
"If Internet is all you need, however, TWC offers its “Everyday Low Price” plan for just $15 per month. This includes 2 Mbps download speeds, 5 emails accounts and 100 MB of email storage. Need to go faster? Try Basic (3 Mbps and $30 per month) or Standard ($35 per month with 15 Mbps). If you’re an online gamer or download large files on a regular basis, the 20Mpbs of TWC’s Turbo plan ($45 per month) may be the best option, while home business users may want to try out the Extreme plan, which offers 30 Mbps download speeds at $55 per month. Finally, if you have a large family or Internet users or connect multiple devices on a daily basis, you may need the Ultimate plan, which provides download speeds of 50 Mbps, 30 email accounts and 10 gigabytes (GB) of email storage for $65 each month."
OK now consider the slope or marginal prices:
- The first 2 Mbps costs $7.50 per. Fair enough.
- But then the next 1Mbps costs $15!
- The next 12Mbps cost just $0.42 per!!!
- Then the next 5Mbps cost $2,
- And the following 10Mpbs are $1,
- And then 20Mbps more at $0.50 each.
A more innocent version of the same thing is wine lists at restaurants. Never order the second item! It's for suckers. To see why, imagine a naive and status-conscious customer who doesn't know much about wine: he will skip the first one to avoid looking cheap, but will hesitate to go to far down the list because they can't justify buying the expensive ones. So he will settle for the second one. The restaurateur willing to exploit this can profit by putting the cheapest wine at the second cheapest price. Thus gouging the suckers without affecting others. The moral of the story is, even if you don't know about wine, you can still have a wine list strategy.