Thomas Dilorenzo’s talk on monopoly and competition got me thinking about the Video Game Crash of 1983. In the United States in 1983, there was a crash in the video game market, The typical story shifts the blame on “third party developers”, that is individuals and small companies who are accused of making games “nobody wanted”. Most of these games are reported to have been inferior in quality.
Now I am aware that the austrian view of diversification of products is that this is good because it leads lower prices as firms compete for consumers.
That’s an interesting episode and one that I’ve never thought to examine through the lens of Austrian economics. I remember the price of games was quite high ($30-$40, maybe even higher) before that, and suddenly became much cheaper as new games from third party developers came on the market. A lot of the new games were terrible and barely playable, but you could buy five to ten of them for what you previously paid for one, and there was the occasional gem in there. The interesting part is that Atari’s branded games fell in price right alongside the third party stuff, not to the same extent, but enough so that we were able to pick up older games we’d wanted for a while at less than a quarter of their former price. It seemed like a strange phenomenon (but not an unwelcome one) at the time, but now it makes more sense. I wonder to what extent advances in console technology played a role. We had the old Atari 2600 and never upgraded to any of the newer and better systems (Intellivision and Coleco). I guess consumer preference for those newer systems forced sellers of Atari games to cut their prices to clear unsold merchandise. But even that wasn’t enough, and unsold cartridges were infamously landfilled.