Wednesday, November 26, 2008

Should This Be Illegal?

I received junk mail today, and nanoseconds before I tossed it, I noticed that the front page advertised a Playstation 3 for $89.99. Waitaminute. That's impossible.

Double-take. Ah. $89.99 a month - for twelve months. Written underneath is "Every Day Low Price: $854.99". (The store is called Aaron's, not Wal-Mart.)

Surfing over to Amazon, you can find them at $399.99. If one was willing to buy at that price, it implies your monthly discount rate is approximately 0.7, i.e. you value $700 today just as much as you do $1000 at Christmas.

Equivalently, it means you value (in real terms) $80 today as $1000 this time next year. I can't help but think that anyone taking this "deal" is not only extremely short-sighted, but very poor at mathematics.

I'm almost tempted to proclaim this should be illegal. But not quite.

1 comment:

Matt Nolan said...

You have been tagged