Foreign Guitars and Price Discrimination

So, I was thinking about guitars the other day. I got to thinking about how imported guitars are generally perceived as inferior quality compared to guitars made in the USA. Now, as an econ major, I can state quite confidently that there is no reason that a guitar made overseas should necessarily be of worse quality than one made in the US solely by virtue of the fact that it's foreign made.

Now, it may be the case (and I believe it is, in fact, the case) that, on average, foreign made guitars are lower quality than American-made guitars, but this isn't directly because of which side of the American border they're made on. There's nothing inherent about Americans that makes them better at building guitars than Koreans, or Mexicans, or the Vietnamese, etc. I suspect that American guitar makers (luthiers, to use the technical term) tend, on average, to be more skilled at guitar-making than foreign guitar makers, but this isn't because they're American. You could, undoubtedly, find and/or train perfectly talented luthiers in other countries, and they'd be able to produce guitars cheaper, because of the relative abundance of labor* in that country.

*note that the glaring flaw in my analysis here is the assumption that the labor required for building good guitars is either virtually the same as the labor required for building cheap guitars, or that it's different but both kinds of labor are relatively abundant in the other country. More on this later.


So, to try to illustrate my point, consider two guitars: the Fender Standard Stratocaster and the Fender American Standard Stratocaster. They're two variations on the same model, mainly distinguished by the fact that the latter is, unsurprisingly, made in America, instead of Mexico, like the former. The Standard Strat retails for $399.99, and the American Standard for $999.99. Now, there are concrete things, other than the country of manufacture, that make the American Standard Strat a better guitar. It has better pickups, better paint options, a better tremolo system, better hardware, better wiring, etc. However, there is no reason a guitar identical to the American Strat, with all the improved options, couldn't be made in Mexico. And if it were made in Mexico, it would be cheaper. AFAIK, and here's where the above asterisk comes into play, there is nothing about using the improved materials and hardware that requires a different sort of labor. So, in other words, Fender could make a guitar identical to the American Strat but make it in Mexico, and it would only cost, say, $600 as opposed to the $1000 they currently charge. Why don't they do this?

My best guess is price discrimination. Price discrimination is when a firm that faces a downward sloping demand curve tries to get different consumers to pay different prices based on what they're willing to pay. For example, let's say that a firm sells a product, and if they charge $100, they'll be able to sell 50 units of that product, and if they charge $50, they'll be able to sell 200 units of said product. Clearly, if these are the only two prices they can charge, they'll charge $50, because that generates a revenue of $10,000, as opposed to the revenue of $5,000 that charging $100 generates. However, if they charge $50, they're charging every customer that price, and there are 50 customers who were willing to pay $100 per unit (assuming each customer buys one unit) but are now only paying $50 per unit. If the firm could somehow charge these 50 customers the $100 they're willing to pay, they'd generate a revenue of $12,500. However, this is easier said than done, because it requires identifying the customers who are willing to pay more than $50 without actually going right up and asking them, because of course no one is going to come out and say how much they're willing to pay. A variety of firms in a variety of industries have found ways around this.

I suspect Fender is engaging in something similar. They're segregating the market into consumers looking for a low price guitar, and consumers willing to pay more for quality. By producing their highest quality guitars in America, they're charging consumers who want to pay more for quality, and are presumably willing to pay more, an additional surcharge for an American made guitar, while lowering the price on lower quality guitars (by having them made overseas) for consumers who are more concerned with low cost. This, I believe, is the reason that American-made guitars tend to be higher quality; not because Americans do a better job of making guitars, but the nature of the market means it makes sense to produce higher quality guitars in America.

(NB. It is, strictly speaking, inaccurate to refer to this as "price discrimination", because that refers to charging different groups of people different prices for the same product, which clearly Fender isn't doing. However, I feel that the basic idea is similar; at the very least, it made me think of the idea of price discrimination.)

Consistency

In the course of my recent intense scholarly study of The Who, I've realized two things.

A) a ton, maybe even the majority, of Pete Townshend's songs use basically the same three chords (the I, IV, and flat-VII, if you're curious). "I Can't Explain", "Magic Bus", "Bargain", "Won't Get Fooled Again", "5:15", "Dreaming From the Waist", "Who Are You", and others are all basically written around those same three chords.

B) All of these songs not only sound distinct and unique, but they're all really excellent songs.

When I was under the illusion that I could actually write music, I was always trying to look for something new to do musically, something that no one had ever done before. I've since realized that it's more important to have something to say.

Left-handedness

I am a left-handed guitar player, which is a rare thing. Left-handers account for about 10% of the general population, but left-handed guitarists (defined as those who actually play guitar left-handed, not lefties who play guitar right-handed) constitute a much smaller proportion of the guitar playing population. This is mainly because left-handed guitars are so hard to find, which is of course a self-perpetuating prophecy, as left-handed guitars are even harder to find when so many lefties don't bother learning how to play left-handed. Anyway, the point is, I did learn to play guitar left-handed, and consequently, I have a hell of a time finding guitars. I learned to play left-handed mainly because I'm such a stubborn and prideful southpaw. That is to say, left-handedness is really important to me. I'm not entirely sure why, but I've always been very proud of the fact that I'm left-handed, and I refuse to sell myself short in any left-handed endeavor. My first guitar was actually a right-handed guitar that I re-strung to be left-handed. The funny thing is that although I intended to restring it from the beginning, it was about a month and a half before I finally did. Until then, I started learning to play right-handed, then started over again from scratch and learned to play lefty once I had restrung the guitar. That's how determined I was to be a left-handed guitar player.

And so, almost 9 years later, I am quite proud and happy as a left-handed guitarist, and I'm, ultimately, glad that I chose to learn the way I did. That said, it is such a pain in the ass to find left-handed guitars that I almost wish I learned to play right-handed. Almost. Of course, it's maybe a good thing that I've been prevented from blowing too much money on guitars; who knows how many I would've bought by now if I didn't have to find left-handed ones. But it's not just about buying guitars. Every time I go to a guitar store and want to try out different models, there are only about 3 or 4 I can really play, and that's at a big guitar store. Or whenever I go hang out with someone and they have a guitar, I can't very well borrow theirs to play on, because I can't play it. It's quite frustrating.

What this all adds up to is I recently asked myself what advice I would give to a left-hander who wants to learn to play guitar. Would I suggest they go the easy, conformist way and just learn to play right-handed? Or would I suggest they stick it to the man and learn to play lefty? I decided that it's all about how important left-handedness is to you. If, like me, you consider your handedness to be a tremendously important, defining characteristic, well, clearly you should stick with that. If you don't, then just take the easy way out.