University of Warwick economist Professor Michael Waterson has predicted that British computer geeks may be willing to pay over £1,500 to get their hands on Apple’s latest iPhone.   

Image by: Krystian Balkowski

Professor Waterson’s study monitored e-bay sales of the iPhone 4 just after the product launch  launched in the UK. Based on sales patterns for the iphone 4, the study suggests that consumers will massively over-pay for its sucessor the iPhone 5.

The study found that consumers paid between £600 and £1,500 for the handsets, which normally retailed at around £499 to £599 in stores.  Professor Waterson said: “We monitored all e-Bay transactions on the iPhone 4 for six weeks from 24th June last year when it became available in the UK. The extent of eBay activity on this product was extraordinary, with total transactions amounting to around £1.5m for 2,183 sales.”   Explaining why the laws of supply and demand were being turned on their head by his study, Waterson suggested that prices that appeared to be driven up by the ‘snob value’ of being one of the first to own the new iPhone.

For the 16GB version of the iphone, 98% were sold for prices above Apple’s retail price of £499, with the average “snob” paying £141.35 over the odds with the maximum paid being £1,180.    In line with Professor Waterson’s hypothesis it was a similar story for the more expensive 32GB version of the iphone that, despite retailing at £599, sold on e-bay for three times the price at £1,551.

Professor Waterson also said that although the iPhone 4 was still officially on sale in stores at this time, there was a delay in getting stocks to retailers.  He added: “The product was in short supply at this time and so it's probable that demand was influenced by immediacy or ‘snob value’. There are rumours that the launch of the new iPhone 5 will be announced next month and it will be fascinating to see what happens to the e-Bay activity around that product.

If Professor Waterson is right it appears that UK consumers are willing to pay way over the retail price for the kudos of being one of the first people to own a latest piece of technology.

Read the working paper


Student Information

The law of supply and demand suggest that a rise in the price of commodities is normally associated with less people wanting that product.  The reverse is also normally true, in that, a fall in price usually increases demand.    As Professor Waterson rightly points out, there are anomalies to this “law” and some commodities can simultaneously enjoy a rise in demand at higher prices.   This “snob” effect suggest that consumers are willing to pay for the knowledge that their purchase will not be available to the poor.  The logic of this argument is that, if a Rolls Royce was cheaper fewer would be sold.  Professor Waterson’s research at Warwick {jcomments on}suggests that the “snob” effect can also be applied to expensive computer gadgets such as Apple’s iphone.