| > if the cost of the hardware is already baked into the cost of the cheapest options, which means they are paying for all of the hardware they have in their cars ... The way to think about it is that the people paying for these extra features / buying the premium model with software-unlocked features are paying to add these features (locked) to every car sold. Because this is cheaper than making a different physical model. For example imagine that 1/5 people want heated seats. Assume that adding these seats costs $100 to the manufacturing costs of a single car. There are two options here: 1. Create a new model. This makes the base model cost more (because you are making 1/5 less units so the overhead of design, validation and setting up the production line is spread across less cars) and makes the premium model cost much more (because you are only making 1/5 of the units). So maybe now you add $10 to the cost of the base model and $1000 to the cost of the premium model. 2. Add the seats to all models. This raises the cost of the car by $100. Let's imagine that the base model price shouldn't be affected by the addition of the premium model. So we want all of this extra cost to be passed to the premium model. In scenario 1 this is effectively $1040 extra per car ($1k for premium + $10x4 base models). In scenario 2 this is effectively $500 per car ($100 x 5). So option 1 doesn't make sense. It costs more for no real benefit. > I can't see how the consumer benefits in that scenario by paying for something they can't use. This is the thing. In theory the base model doesn't need to pay extra. Yes, their car was more expensive to make, but this cost was paid for by those who bought the premium model. I don't know if I would argue that the consumer of the base model "benefits". Their model could be subsidized, or it could cost more, money is fungible in that way. But there is no reason why having this hardware installed but locked should increase the price that they pay. Without further evidence one would hope that the price of the car is unaffected by the premium model. Or maybe even cheaper because of benefits of the economy of scale (especially if the ratio of people buying the expensive model is higher). I wrote a post about this a while ago with very simple examples of how the math works out https://kevincox.ca/2023/05/14/ethics-of-locked-hardware/ |