Monday, November 08, 2010

The Most Expensive Liquid You Can Buy

I'm in the market for a new printer. My existing one, a cheap Canon printer I've been using for over five years, is wearing down. It jams and the head occasionally prints a letter out of alignment. Since I'm sending out job applications, a new printer would be a big help.

But printer ink's the most expensive liquid you can buy. Printer manufacturers claim it's the technology which drives up the price. And yes, ink technology has noticeably improved over the past 20 years. A single cartridge for my printer runs $23.49 at Office Max and contains about 12 ml of ink, or $7,409.94 per gallon. I'm not buying the technology story.

I trust the tying pricing model, a form of price discrimination. Manufacturers sell a cheap printer (another reason to discredit the technology story: about half to one-third the price of the printer is eaten up by the ink it comes with) but charge a lot for ink. They are able to charge more for people who like to print and less for people who don't print very much, capturing the gains from those who are willing to pay a lot while still getting profit from those who are willing to pay only a little.

I tell my students to make sure you know the whole price of a good before you buy it and so I called Cartridge World to verify they carried cartridges of a printer I'm looking at, the Epson Stylus NX125 (the web site says it's $50 but I swear when I saw it in the store it was $40). They do not...yet. Cartridge World takes the empty cartridges people bring in (presumably for some store credit or a discount), fills them up, and sells it back. But the NX125's a new model and they don't have any cartridges yet. Moreover, manufacturers know places like Cartridge World exist and reformulate their ink so it only works with that cartridge (the printer head's a patented piece of technology), requiring other guys to figure out the formula so they can produce it for the manufacture's competitors.

It's around this point in our conversation I realized printer pricing is backwards from pricing of virtually all other consumer products: the new stuff isn't more expensive than the old stuff. It's cheaper.

If you buy an old printer, the manufacturer knows they can't get as much money from you since you can reliably buy ink elsewhere. They have competition from a key source of revenue. So they charge more for the printer to (a) capture some of the value when they can and (b) discourage you from buying the old printer in favor of the new one. I doubt new technology's driving up the price of ink but it looks like it's driving down the price of printers. Weird.

Note this also puts manufacturers in a tough place when it comes the planned obsolesce. They want you to buy a new printer but they don't want your printer to fall apart so fast you go to another manufacturer.

If my current printer didn't work, I'd probably buy a "old" printer since I print a lot. But most of my printing are things like rough drafts of papers, things where great printer quality isn't an issue. So I'll probably buy a new printer and live off the ink it comes with, printing only professional documents. The only thing is I'm not sure how annoying it will be to constantly plugging and unplugging printers. But it will make me feel like I'm outsmarting these manufacturers and I do like feeling clever...

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