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Console Shortages: Why not use charity auctions?

We saw shortages with the 360 last year and now with the PS3 and Wii this year. A normal free market will respond to shortages by raising the price until the shortage is over. That’s the standard, textbook response. However, that’s simply not an option since that would trigger huge, lasting negative sentiment among the public.

We’ve seen people go to extreme measures to increase their likelihood of getting the chance to buy a console during a shortage. People have waited in line for days and others have paid people to wait in line for days. And of course, there is a gray market of console scalpers.

All of this is so wasteful. Instead of just selling the units at a shortage price and letting the crowds and the scalpers sort it out, how about a better solution: Charity Auctions.

It works just as you’d expect: people bid the price up as high as they are willing to pay. The regular retail price is distributed normally to the manufacturer and retailers and the surplus beyond the retail price is given to a neutral charity.

This works well because:

  • It’s fair.
  • It’s definitely not greedy.
  • People are rewarded for doing something productive rather than looking for pre-order loop holes or waiting in line for days.
  • Money really does go to a good cause rather than to wasteful activities such as scalping and paying people to wait in line.

Many big shows and music concerts have used this strategy when there is huge demand that far outpaces the limited number of seats and it has worked out well. Why not use this system for a console launch shortage?

Nine Inch Nails auctions concert tickets and donates extra profits to charity