All prices expressed in US dollars.

Breakfast at a diner costs about five bucks, tops. I recall a time back in the late 1980's when the "$2,000 workstation keyboard" was a category of synthesizer that all the music magazines talked about in product reviews. There were a lot of $1,200 synthesizers on the market, too. Nowadays, the $800 home computer is a big seller. Mind you, they're not all exactly $800: Some cost only $749.99, some cost $799.99, and so on, but from a marketing standpoint and from where most consumers sit, they're all "eight-hundred dollar computers".

In the home computer market, $800 is a "price point". To hit a price point is to price your widget at or not far below that amount. A lot of people are willing to pay, roughly, about that much for a computer. Dell, Apple, Gateway, CompUSA, and Microcenter all have $800 home computers prominently displayed on their web sites (Dell, ever innovative, gets a caveat: Their $800 box is one of the three least-effectively hidden products on their site). Compaq and Radio Shack (Radio Shack sells Compaqs) are aiming for $700, and CompUSA's got one of those too. In addition, everybody seems to be stretching to hit $600 right now.

Selling manufactured goods is an optimization problem. These aren't potatoes: A potato is a potato is a potato, assuming it hasn't grown tentacles yet (Michael Dell has, but that's off-topic). We call home computers a "commodity" because they all crash in the same way when you try to run Word, but they're not exactly pork bellies. There's still variation in the fine detail. An OEM has a lot of different choices about what to put in that beige box, and a lot of choices about how much to charge for it. The vagaries of the human mind (and the human credit rating) figure into this: You could give people another seventy-five bucks worth of value for fifty bucks more and they might buy the other box anyway. You might buy slightly cheaper and shoddier components, shave a little flesh off of a perilously thin profit margin, and hit $779, and they might buy the other box once again. People's perceptions tend to translate prices into round numbers. This applies much more to "consumers" than it does to large companies buying nineteen dozen of something, with accountants frowning over their shoulders.

When you're selling an item that people only buy one of, prices will clump together like this for a variety of reasons. Products in a given price range will compete on the basis of small differences in features and marketing much more than they compete on cost. The differences will be small. It's not an exact science (see Compaq above) and it's not (not necessarily) any kind of price fixing conspiracy, but it's quite real, and people call these clumps "price points". A company will "hit" a few of them as, leaping and howling, they savagely pursue different segments of the market across the green valleys and rolling hills of the post-industrial economy: $600, $800, $1,200, and so on.

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