Ripoff

from Marginal Revolution: The Economics of the HDMI Cable Ripoff -

The second puzzle is, Why don't any stores stock cheap HDMI cable? Ordinarily, we would expect competition to push prices down but in this case it seem as if the mere existence of Monster is anchoring high prices everywhere but online.

My best guess is that this is an unusually strong version of the hidden fee model of Laibson and Gabaix. In that model, firms overprice one aspect of service--such as a hotel charging exorbitant rates for telephone service--as an idiot tax. Crucially, the idiot tax is matched by an IQ-subsidy; the price of the hotel room is lower than it would be without the idiot tax--so the idiots don't know to shop elsewhere and the high-IQ types are, in fact, drawn to stores with an idiot tax. Thus, buy your blu-ray player at places such as Best Buy which sell a lot of expensive cable as well as massively overpriced extended warranties.