economics for tuba players..

[funkcicle]

Just thought I'd put this out here in hopes that some of you more economically-savvy tubists can enlighten me.

I'm sure we're all moderately conscious of tuba pricing trends, and as such, I'm sure most of us have noticed the gradual rise over the last few years... seems..back in 1999 $3,000 was ample money for finding a good used horn, where now $5,000 almost seems requisite. I'm interested in the economics of a specific American horn, though..

When this horn made it's early debut in late 99/early 2000, the limited # of horns available were selling for $3,795, very shortly after marked up to $3,995 with the next batch. Around mid-2000 the price was again bumped to $4,250 with a published list price right aroud $5,995.. 2001 saw the sale price rise up to the $5,995 list, though the "regardless of finish"(of which 4 were available) denotation still seemed to apply. By this time, used models were becoming available and the horn certainly established itself as a sub-$4,000 horn on the used market..even as supply on this horn was supposedly "severly backed up".. and the sale price kept rising..list in late 2001 was updated to $6,995 with horns now selling at last year's list price of $5,995.

Fast forward to 2005, this horn now retails for $7k, though the satin finish brings a $500 surcharge. Published list prices are now $11,795 and $12,795 respectively.

So that leaves me with a few questions,

1) Is the rise in price proportionate with the general inflation we've experienced over the past 5 years? What other factors might weigh in?

2) Given that we've seen the price of this horn rise above the orignial list price in a 5yr span, is it reasonable to expect that this horn will be pushed into the $11k+ range in the next five?

3) Is it actually possible that the production costs on this horn have more than doubled in 5yrs(?),.. OR

4) Is it more likely that these price adjustments are due to the rising value of the euro? (oh ho HO!)

Obviously, I find it <b>more</b> likely that the rise in price is simple opportunism, to match the rising price of German horns in the American market rather than to accomodate for a doubling of production costs, but I'd like to here other peoples' take on this situation.

Thanks for playing!

[TubaRay]

My guesses as to answers to the posed questions above:

1)supply & demand
2)I doubt it
3)possibly, not likely
4)certainly at least partially responsible

Of course, I'm a musician, which pretty well serves as proof that I know absolutely nothing about economics(6 hrs. of college credit, but to no avail).

[iiipopes]

You will be assimilated. Resistance is futile.

[MikeMason]

they have a finite production capacity and are pre-sold as far as the eye can see. what would you do? if they start piling up in the warehouse,the price will come down...

[bort]

...they need to work on that slogan they're using to sell them. Not quite the best wording...

What's their slogan?

[Rick Denney]

A rise in inflation is a rise in cost, while you have noted a rise in price. Price and cost are NOT the same. Price is determined by what buyers are prepared to pay.

A manufacturer must be able to produce an instrument and bring it to market for less than the prevailing price in order to make a profit, and without profit the business either folds or goes on to more productive activities. But a manufacturer may sell a product at a price below cost for a while to establish it in the market. If the product proves to be popular such that demand exceeds production capacity, the price WILL rise. Any company that is not bound for bankruptcy will sell their limited production capacity to those will to pay the most.

If a company could sell 10,000 tubas for $500, 1000 tubas for $5000, and 100 tubas for $8000, and they could only make 100 tubas, then they'd be irresponsible with their investors' money to sell it for less than $8000.

It is not opportunism or any other immoral thing. It is being a good steward with the money entrusted to them by investors who have a right to expect the maximum return on their investment. If the company is compelled by some external force (such as, say, government price controls) to sell for less than the highest price, the inevitable result is usually a lessening of production quality as they attempt to meet market demand that is beyond their production capacity. It is in the buyer's best interest to pay the highest price the market will bear, because that provides the company the best opportunity to produce the best product. If it's too expensive, buy something else.

The King 2341 is made from mostly the same parts as the Conn 56J, but it costs less because those who buy it will only pay less. Thus, the King's production quality is not really on a par with the Conn.

So, the price increase has nothing to do with costs, and it is not likely to continue on its present trend. The price will stabilize over time at the balance point between demand and production capacity (supply), and it probably already has. If demand drops, so will price, unless the company moves resources to other products, thus limiting supply.

Rick "noting that buyers set prices" Denney

[Shockwave]

The value of the Euro has increased 55% since 2000, but the tuba price has gone up 76%. That seems kind of suspicious.

You're just another victim of the mysterious inflation rate in the US. The official rate has hovered around 3% for years, yet in 4 years prices have increased around 40% for housing, food, fuel, tuition, building materials, Euros, etc. Now that's fishy! Most people don't notice because more products have been coming from China, a country that pegged the value of its currency to the dollar. They recently abandoned the dollar, citing long term security. Large corporate pension funds have mysteriously begun to falter even though they still make a 7% return that should easily outpace inflation. Credit card companies recently pushed for and got new legislation to make it more difficult for people to escape debts via bankruptcy. Corporations and the Chinese government are quite savvy, so these things are not good signs.

Of course the inflation rate isn't that mysterious. People have been borrowing a tremendous amount of money and spending it. More money in circulation makes prices go up. Money is cheap to borrow, so people borrow more for homes, raising prices, and prompting other people to borrow against their now more valuable houses. Supply and demand determine price, however cheap borrowed money artificially increases demand. I'll bet that a lot of people are borrowing money to buy tubas these days, adding that third mysterious factor into the pricing strategy.

How about a nice, used tuba?



-Eric

[ken k]

chances are the manufacturer kept the introductory price low to get it out in the market and get it into some customers hands. Now that the horn is viewed as a competitive horn in the marketplace, they are bringing the price up to the level where they feel it should be. The market will judge whether the horn is worth that much.

ken k