Question

When Sony released the PlayStation 4, it was reported that Sony was taking a loss of $60 on every PS4. However, Sony expected to make this up with sales of PS subscriptions and increased royalties from video games. Use the interdependence principle to help explain this strategy.

The PS subscriptions allow PS4 owners to play their games online, receive new games monthly to download at no charge, and receive additional special discounts on other items. Therefore, the PS4 and PS subscriptions are _________ in consumption. Decreasing the price of the PS4 will the demand for PS subscriptions. Sony expects that revenue from recurring PS4 _________ will be larger than the loss in revenue from PS4 sales.

Answer 1

Answer: Complimentary; Increase

Step-by-step explanation:

Therefore, the PS4 and PS subscriptions are complimentary in consumption. Decreasing the price of the PS4 will increase the demand for PS subscriptions. Sony expects that revenue from recurring PS4 will be larger than the loss in revenue from PS4 sales.

When goods are said to be complimentary it means that they are used along with each other. Like coffee and sugar. The PS4 and and the PS subscriptions are complimentary because owners of the PS4 use the PS subscriptions to play online.

By reducing the price of the PS4, more people will be able to buy it and then will have to make PS subscriptions so that they can play the PS4s thereby giving Sony revenue which might be higher than the amount they lost by reducing the PS4 price.