Is Apple Exploiting Consumer Irrationality?

Dave Hoffman

Dave Hoffman is the Murray Shusterman Professor of Transactional and Business Law at Temple Law School. He specializes in law and psychology, contracts, and quantitative analysis of civil procedure. He currently teaches contracts, civil procedure, corporations, and law and economics.

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6 Responses

  1. Frank says:

    Great post, though I’m not as conflicted as you. The success of the iPod is a great example of network effects, which should merit just as much antitrust scrutiny as Microsoft’s OS got in the mid-1990s. I’ll develop that point via an anecdote.

    I got frustrated by my first iPod, a piece of junk that barely worked. So I switched to a Dell, which was a good player (still works!), but connected to a terrible piece of software (MusicMatch).

    Meanwhile, a billion dollar iPod “ecosystem” (see NYT story of last week) developed, promising every imaginable type of accessory to make PodPeople’s life a breeze. (I even got a Prada iPod holder as a joke gift.) Podcasts emerged, all organized intuitively on the iTunes MusicStore, and are conveniently updated by its software. So by the middle of ’05 I was back to the “piece of junk,” and when it conked out, I got a new iPod.

    But far from leading us to celebrate the iPod, such developments should spark skepticism and concern about Apple’s business practices. As James Boyle’s brilliant FT article “The Apple of Forbidden Knowledge” suggests, Apple’s tactics here are just Microsoft-style monopolizing writ small. It’s using DRM to lock people into iTunes, using iTunes to lock people into its players, and who knows when they might suddenly decide to leverage that dominance into an effort to force all iPod users to buy Macs? “Just buy a Mac desktop” was suggested to me more than once by the guys at the ironically named “Genius Bar” at my local Apple store.

    Interoperability should be a paramount goal for the digital economy. To the extent Apple uses its dominant position to thwart it, it deserves scrutiny under the relevant competition laws.

  2. Podesta says:

    Nocera’s problem is twofold:

    •His family is unusually clumsy.

    •He does not buy extended warranties but expects to be treated as if he does.

    Most broken iPods are under warrranty, either the original one-year or an extended warranty. Nocera chose to be in the situation he is in by not buying an extended warranty.

    Nocera’s attempts to shift the blame to Apple are unconvincing. This situation is his fault.

    Interestingly, his column is part of the NYT’s relatively new paid content program. An equivalent argument could be made that since we got used to reading NYT content free, Nocera should publish his column without the paid content restriction. After all, that is what we consumers had come to expect.

    Frank’s biased remarks read like astroturf from Microsoft. Windows DRM is no less offensive that Apple’s, if one considers DRM offensive. Yet, Frank somehow forgets to mention it.

  3. venson says:

    sometning is better then nothing.

  4. Mac Lover says:

    Please. You shouldn’t have to buy an extended warranty for a product to last more than one year! We’ve always loved macs and apple, but we’ve had the same ipod experience — it lasted just over a year, and started to crash — now is dead. I completely agree; you spend that much for a little thing, you expect it to last longer, and don’t expect to have to pay more for an extended warranty

  5. Bill says:

    Couldn’t agree more with Mac lover. My IPOD crapped out on me after two years. I am holding off buying a new one due to Apple’s indifference with my situation. Good manufacturers and retailers stand behind their products. Look at Timberland, Foot Joy, Brookstone, Sharper Image, Costco. All will replace product with very little questions.

    When I buy a $300 item I shouldn’t have to buy an extended warranty. The Podesta post confirms that Apple’s workmanship is shoddy.

  6. Sneiq says:

    Don’t the majority of manufacturers of “gadgets and machinery” offer warranties just below the limit of life-spans? Don’t we all have the feeling that items were built to last forever two decades ago, but that is not the case anymore? Does anybody not know about cost optimization issues in any company throughout the world nowadays? Meeeen, this is the gamefiled we have…