economic elasticty of knives?

[shootist16]

I am curious as to whether anyone has attempted to figure out what the economic elasticity of knives is. Would you think that knives would be relatively elastic or inelastic? That is how dramatically do sales decrease as price increases? At what price point do you think knives would be at the point of equilabrium? Thanks in advance.

------------------
Dennis Bible

 

[Chief]

You taking college Econ Dennis?

I think the higher end knives are fairly inelastic with lower end knives being fairly elastic.

 

[Steve-O]

I think that CRKT would be a good company to watch. At the moment, it looks like they are trying to determine the upper limits of that equilibrium.

Other factors are involved, collaborations, quality, service, materials etc. And what about the undefineable 'style'? If all things were the same, wouldn't the wise man buy the cheapest blade?

A good question, but again, one that is hard to answer. I would be willing to bet that 90% of all knives sold cost less than $30.00...is that your answer...?

Steve-O

 

[knifenerd]

Dennis: A good question and a difficult one to answer without being privy to detailed financial statements of many knife companys. I think that up to a level of the $100 to maybe $150 there may be a direct relationship to decreased sales as the price goes up. After that, as the price increases, the market becomes very specialized and limited,but is strong for that particular segment of the market. I would put the break even level at about $150 MSRP.

 

[shootist16]

<font face="Verdana, Arial" size="2">Originally posted by Chief:
You taking college Econ Dennis?

B]</font>

You got it. This is my last year and I will have my B.S. in Organizational Management. I am taking economics this semester. I am trying to livin up a somewhat boring topic. You must have taken an economics class or two yourself.




------------------
Dennis Bible

 

[mnblade]

shootist16: Perhaps you could write to all the major knife manufacturers and ask them this question. Ask for their annual reports too. Sometimes you'll be surprised at the level of cooperation. A friend of mine once did an economics project on the rebirth of Harley-Davidson. He wrote to the company asking for info/material to use in a presentation. Well, a H-D vice president offered to fly down and take part in the presentation to the class! You never get anything unless you ask for it.

 

[DaveH]

There is also other things at work. When the economy as a whole is slower, there's a greater demand for used knives, and dealers are more apt to take a used knife as a trade in on a new purchase.

When the economy is better you have greater difficulty in selling used knives at least in certain prices catagories. In My Experience.

We've talked about the internet in other threads, but I still find it inetresting because with the internet and forums such as this the velocity of information has increased tremendously. Now you can hear about great prices and make and order, or hear new information that affects your knife buying all within seconds or minutes.

What's the results of that? It accentuates the peaks of demand, because everyone wants one and has heard about it. It also makes demands trail off more quickly, as products get replaced with new products and fall out of favor or style.

It also encourages knife companies to innovate faster, if your a company that can do that, CRKT springs to mind, you're the ticket. If you're a company that continues to be locked into traditional knife lines, you get less interest, receive less of this new market, etc. I think knife companies have been using collabration with known makers as an avenue in providing this innovation.

The liquididty of knives increase too, as you can create demand and sell them in a hurry. You also have the aggregate effects of bringing sellers and buyers together in larger numbers for more intimate market "conversation".

On the flip side if you're a company that doesn't make it in terms of quality, customer service or honesty, then you can get hit hard, where as before you could get by with it.

My guess it's probably tougher than ever before to be a knife company and having to deal with these issues.

You could argue that net sales is a small part of some companies sales, and that's probably true. But even without the web you still have similar kinds of effects.

DaveH

 

[DaveH]

Can you tell I love this topic?

When I took micro-economics, we never really talked about anything but price. IMO, there's a whole lot more that impacts elasticity or inelasticity.

Reputation, convenience, quality, standards, popularity, marketing, etc. All impact how much people seek out and or are willing to pay for a product. Classically speaking it used to be price was the significant factor. IMO, these other things play a larger role than before.

If they don't talk about it in class, bring it up, see what they say.

DaveH

 

[shootist16]

<font face="Verdana, Arial" size="2">Originally posted by DaveH:

Reputation, convenience, quality, standards, popularity, marketing, etc. All impact how much people seek out and or are willing to pay for a product. Classically speaking it used to be price was the significant factor. IMO, these other things play a larger role than before.

If they don't talk about it in class, bring it up, see what they say.

DaveH</font>

I will bring it up in class. Excellent point. It makes sense to me.



------------------
Dennis Bible

 

[RDaneel]

Dennis,

You might also want to look into the Marginal Rate of Technical Substitution as a factor in the price elasticity of knives.

Dean

 

[Burke]

Funny you should bring this up, as I'm currently taking a statistics class, and I've been thinking about ways to apply statistics to knife factors like edge retention. School and sharp things, who woulda thunk it?