Price Discrimination at Intel Essay Example

run at a slower speed.

This is done to allow Intel to sell its product inventory across a wide range of price points. By offering a wider range of prices, Intel is able to maximise the surplus it generates from sales. This process of down marking otherwise good chips is commonly known as ‘binning’. As an example of how far this practice of ‘crimping’ or ‘binning’ has come, in late 2010 Intel experimented by releasing a series of software-locked processors. Rather than rebadging components ‘behind the scenes’, Intel openly offered customers under performing processors at a discounted price.

The company then offered the ability to ‘upgrade’ the performance by purchasing a code from Intel – customers would then enter this key into their computers and the full speed of the processor would be available. This strategy of crimping has some negative consequences. Firstly, the option to selectively rebadge/rebrand products manifests itself as an additional cost to Intel as the company must factor ‘binning’ into the design of its processors and into the processes and procedures of its manufacturing technology.

Secondly, as the practice of binning has become more publically known, some customers have expressed feelings of anger and disgruntlement at the fact the product they are purchasing is not running at its true performance level. Finally, there is a small but vocal enthusiast community who act opportunistically by purchasing discounted processors in the knowledge they can ‘overclock’ them to meet or exceed the performance of Intel’s more expensive offerings.