China Law Blog

I've yet to take the time to read the original post which inspired your post, but the idea of an "iPod index" seems to me to have far more problems than that of the "Big Mac index." For one, unlike a big mac, which will typically be sold for the exact same price at every McDonalds outlet in a country, the price of an iPod differs by city, where you're shopping, etc. It may work for US and Euro countries with their Apple stores and thus set prices, but in China, even among authorized Mac retailers, the price can be plus or minus a few hundred RMB. To me, the biggest problem, though, isn't price difference, but import taxes that wouldn't exist on a big mac, but often exist on ipods. For example, the difference in price of many items in Shenzhen as compared to Hong Kong, a half hour away, can be startling. Perhaps this is why Brazil is so high.

Brazil has very high taxes and Japan is cheap for tech. Its rice that costs money in Japan.

Thirded; Apple is very strong in brand management while offerring what is technically an inferior product. What gets me is that they're marketing a demotic product, a dumbed-down PC, as a luxury good. Further, their business relations is extremely obnoxious, while the market doesn't give a damn; remember that incident when iPod Nanos were shipped with a loaded Windows virus, and Apple basically blamed the users for owning a Windows machine? Or remember that incident when Apple bricked a Great Wall of iPhones counter-contractually modified with third-party software? My revenge, Ishallah, will be when the cyber-warfare really goes bad, people are going to find out that Apple computers and Apple hardware tend to be the favored vectors for zombie attacks, and Apple's revenge on me is when that does happen, the market still won't give a damn and it'll still be a very popular product.

It's well-known that Apple manipulated the prices of the iPhone; you paid an extra $200 for the right to be a cutting-edge iPhoner. A few weeks later, Apple cut the prices by $200. Further, Apple has an effective monopoly; they can set the prices however they will depending on market conditions in order to maximize profits. Finally, a Big Mac, let me assume, is produced through both local labor and local produce. The only international inputs are the intellectual property, and in the initial stages, the management. An Apple product, on the other hand, is made in China or Malaysia. If you've travelled, you'd probably have noticed that the prices of electronics are almost always the same, so the variation in pricing can be accounted to inputs and how much Apple can rip off the consumer. Considering this, Apple products are not really a good indicator of PPP.

Big Mac prices vary by city in the US, and the base of the index, the price in the US, is determined by a price index of 3 US cities.

It seems like the inability to engage in international Big Mac trade would make it a more valuable PPP tool by eliminating any normalization that would occur due to savvy internet iPod marketers, resulting in a single price across the globe. Are Apple consumers really not as savvy as Apple Guy suggests? Brazil and India have some significant gray iPod market room that should be filled...

I'm not at all sure how apple calculate their local prices in different countries, but compared to the BigMac Index the iPod index seems more flawed to me. Where the BigMac cost depend on local labor cost and raw ingredients conditions iPods are for most markets imported at the same price. With my small knowledge of different market conditions the iPod price differences seem to match well to local VAT and Import Taxes - The index would need to be adjusted for these taxes before you can effectively say that an iPod is more valuable in country compared to another.

I'm with Emil. The US$149.00 iPod doesn't cost $149 anywhere one would buy it in the US. So the comparison is a bit specious. For example, in King County, Washington, the US$149.00 iPod would be subject to 8.9% sales tax, for an after-tax price of US$163.29. That's the price we ought to be looking at.

In Korea, according to Big Picture's index, the iPod sells for $176.17, about 7.5% more than in the US. And wouldn't you know it? The iPod is subject to an 8% import duty, which then is subjected to a 10% value-added tax (sales tax) on the after-duty price.