Thursday, June 28, 2007


The Apple iPhone is this summer's must-have gadget, and lines began forming across the country four days early for the chance to grab one of the first available. iPhones sell for about $500, and if you hope to get one early, you may have to queue up for days just for the privilege.

Paradoxically, the type of people who are willing and able to spend $500 on the iPhone are also likely to have high-paying jobs that make it difficult to take an entire week off to wait in line. Fortunately for gainfully employed iPhone seekers, summer has brought with it a surplus of young people looking to earn a bit of extra money.

Ads are popping up all over Craigslist for so-called "professional waiters" who, for a fee, will line up to buy you an iPhone. The going wait rate is currently around $250 in New York and $200 in San Francisco. Lines are now full of people donning "iWait" shirts to show off their newfound occupation.

While the iPhone scene is replete with interesting economics, perhaps the most interesting phenomenon is the group of people who choose to bear the cold nights themselves rather than pay an iWaiter. With an ample supply of "low-skilled" workers fit for the job, many still choose to do the waiting themselves. Why would someone prefer to spend his or her own valuable time waiting in line when they could pay someone else who, by virtue of their offer, almost certainly has a lower opportunity cost?

Discussion Questions

1. What factors determine a person’s opportunity cost of waiting in line to buy an iPhone?

2. What benefits might people reap from waiting in line? (Maybe they enjoy the camaraderie? Perhaps they are "purchasing" a good story to tell at parties?)

3. All transactions involve an element of risk. Contracts, social norms, property rights, insurance, and consumer protection laws can help to mitigate transaction risks and facilitate trade, but waiting in line to buy an iPhone is a fairly informal transaction. What risks do line waiters assume? What risks do the people paying line waiters assume? Search for some iPhone line waiting listings on the Craigslist site for the San Francisco area. In what ways do iWaiters attempt to mitigate transactions risks?

4. If people are willing to pay upwards of $700 ($500 cash, $200 for a waiter) for an iPhone, why doesn't Apple raise the price?

Financial Times economics reporter Tim Harford addressed a similar question about the Xbox 360 shortage of 2005 here and here.



  • At 11:45 AM, July 02, 2007, Blogger William Chiu said…

    Contrary to what many classical economists would say, Keynes argued that prices are rather sticky in the short run. In other words, firms do not adjust prices automatically to reflect the laws of supply and demand. The main reason for price stickiness is that it is costly to change prices--menu costs, bad public relations, and imperfect information.

    However, in the long run, markets do move towards equilibrium with higher prices that eliminate shortages. However, in the case of iPhones, the shortage might just be temporary, and we should NOT expect the price of the iPhone to increase in the long run.

  • At 9:27 PM, July 08, 2007, Blogger Dakoo said…

    The price of the iphone was set taking into consideration its alternatives, other phones with similar features are within the same price range. Yes prices do not change in the short run, maybe because the initial price already takes supply and demand into consideration, hence 'price stickiness' in this case could be irrelevant. Electronic products almost certainly get cheaper in the long run.

    Adam Smith talked about man's propensity to truck, barter, and exchange. People are always buying and selling stuff. Always looking for a deal. Always looking for a better deal. Always considering the alternatives. The search for a good deal by both buyers and sellers considering alternatives is what economists call competition. The result is that transactions in a market are not independent of one another.

    Where do prices come from? The prices that we observe in the world around us emerge from the interaction between buyers and sellers and their alternatives.

  • At 10:42 PM, July 23, 2007, Blogger EA Lopezlira said…

    How would the logic of this argument differ for the latest Harry Potter book? One can easily explain that kids have a low opportunity cost of waiting, so they will stand in line instead of paying a professional waiter, but how about adults who wait in line? I doubt only low income adults are buying the book. So, why would an affluent reader not pay a professional waiter?

    I saw on the local news long lines (both adults and children alike) forming at bookstores prior to midnight (when the book was released), yet I went the very next morning to a Target store and bought the book without having incur the opportunity cost of waiting or paying a professional waiter.

  • At 10:44 AM, July 27, 2007, Blogger stafex said…

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