Nintendo

1
Nintendo

• Joe Romano
• Bill Zopf
• Abby Croner
• John Ross

2
Table of Contents

• History Joe Romano
• Resources Joe Romano
• Opportunity Costs of Nintendo Joe Romano
• Specialization Abby Croner
• Complements Abby Croner
• Substitutes Abby Croner
• Demand Bill Zopf
• Price Discrimination Bill Zopf
• Perfect Competition John Ross
• Government Intervention John Ross

3
History of Nintendo

• The original Nintendo Entertainment System (NES)
  is released in 1985. Becomes 1 selling toy in
  U.S. by 1987.
• Game Boy is released in 1989.
• Super NES is released in 1991.
• Nintendo 64 is released in 1996 and sells all
  350,000 available units in 3 days.
• Source www.nintendo.com

4
History Contd

• Game Boy Color is released in 1998.
• Game Boy Advanced is released in 2001 selling one
  million units in 6 weeks.
• Gamecube is released in 2001. Sold 500,000 units
  in 2 months.
• Source www.nintendo.com

5
Resources

• 3 types of resources are Land, Labor, Capital
  (Includes both types of capital).
• Land is the physical space on which production
  occurs, and the natural resources that come with
  it.
• Labor is the time spent producing goods and
  services

6
Resources Contd

• Physical Capital is the long lasting tools used
  in producing goods.
• Human Capital is the skills and training of the
  work force.

7
Nintendos Uses of Resources

• Land Production plants where gaming hardware
  and software is produced.
• Labor Programming software, and packaging
  products are just a small example of the labor
  used by Nintendo.
• Physical Capital Computers used to program and
  produce hardware and software.
• Human Capital The knowledge possessed by the
  programmers.

8
Resources Contd

• Scarcity in each of resources leads to
  opportunity costs.

9
Opportunity Costs

• The value of the next best alternative given up
  when making a choice or taking action.
• Nintendo must consider the opportunity costs when
  deciding what to produce and how much to produce.
• If it costs 15 to produce a Gamecube and 5 to
  produce a game, Nintendo must decide how much
  resources get allocated to each product.

10
Opportunity Costs Contd

• The Gamecube retails for 149.99 while a game
  retails for 49.99.
• The opportunity cost for producing a game rather
  than a Gamecube is 90.
• 149.99 - 15 134.99
• 49.99 5 44.99
• 134.99 44.99 90

11
BUT!!!
12
Opportunity Costs Contd

• Due to factors of production Nintendo can produce
  3 games for every one Gamecube.
• This means Nintendo will receive 134.99 in
  revenue for the sale of one Gamecube, but will
  receive 134.97 in revenue for producing 3 games.
  Thus eliminating almost all opportunity costs of
  producing games rather than a single Gamecube.

13
How is it possible to produce 3 games in the same
time it takes to produce 1 Gamecube???
14
Specialization

• Specialization is a method of production in which
  each person concentrates on a limited number of
  activities.
• An example is having trained programmers
  programming games and not putting together the
  actual product.

15
Specialization Contd

• Absolute advantage vs. Comparative advantage
• Absolute advantage is the ability to produce a
  good using fewer resources than other producers.
• Comparative advantage is the ability to produce a
  good at a lower opportunity costs than other
  producers.

16
Specialization Contd

• Mario can program 8 games and build 2 Gamecubes
  in 1 hour.
• Luigi can program 3 games and build 1 Gamecube in
  1 hour.
• Mario has the absolute advantage in both
  programming games and building Gamecubes.
• So why do we need Luigi???

17
Specialization Contd

• Luigi has the comparative advantage in building
  Gamecubes.
• If Mario were to build Gamecubes then Nintendo
  would lose 4 games for every Gamecube. But with
  Luigi building Gamecubes Nintendo only loses 3
  games.
• Thus Luigi has the comparative advantage in
  building Gamecubes.

18
Specialization Contd

• By recognizing who has comparative advantages in
  production Nintendo can cut down Opportunity
  Costs.
• This lets Nintendo produce as much as possible in
  certain amounts of time.

19
Complements

• Complement is a good that is used together with
  some other good.
• To save information from the Gamecube it is
  necessary to use a memory card thus making memory
  cards complements.

20
Complements Contd

• The software is a complement because the Gamecube
  is useless without the games.
• Controllers are also complements because it is
  impossible to play Gamecubes without the
  controllers.

21
Substitutes

• Substitute is a good that can be used in place of
  another good and it fulfills the same purpose.
• Playstation 2 and X Box are both substitutes for
  Gamecube.
• Sega produced video games are substitutes for the
  ones produced by Nintendo.

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• Both Substitutes and Complements play a role in
  the demand of products.

23
DEMAND

• Is a relationship showing the various amounts of
  an item which buyers are willing and able to
  purchase at various possible alternative prices,
  during a given period of time.

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Ceteris Paribus Factors For Demand

• Income
• Number of Consumers
• Expectations of Consumers
• Price of related goods
• Tastes

25
Demand (Cont.)

• Demand has been very high for Gamecube. From
  August 2002 to December 2002 Nintendo shipped
  over 1 million systems to be put onto store
  shelfs.

26
Price Discrimination

• Is when a seller charges different prices to
  different consumers for reasons other than
  differences in production costs.

27
Price Discrimination (cont.)

• An example of Price Discrimination through
  Gamecube is the use of coupons.
• Another example is Nintendo usually lowers the
  price of a game as it gets older.

28
Perfectly Competitive Market

• Large number of buyers and sellers.
• Sell homogenous product.
• No artificial barriers for entry or exit.
• Perfect knowledge about market.
• Price takers.

29
Perfect Competition Contd

• There are many video game producers in the same
  market as Nintendo
• Consumers perceive all video games to be the same
• Very easy to begin producing video games

30
Perfect Competition Contd

• Each company knows the same as the other
  companies and the consumers as well.
• Each firm understands the value of the product
  and realizes how much they can charge.

31
Government Intervention

• Government has placed a rating system on video
  games
• Comparable to the rating system of movies.

32
Government Intervention Contd

• A Adults only
• EC Early Childhood
• E Everyone
• M Mature
• T - Teen

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Conclusion

• The previously mentioned topics are just a few
  ways that what we have learned in Micro Economics
  applies to Nintendo.