For those not aware of the Big Mac Index, here’s a definition:
The Big Mac index is an informal way of measuring whether one currency is at the theoretically correct exchange rate with another currency. The measure assumes that the theory of purchasing power parity (PPP) holds.
So, basically, the Big Mac Index tells us a lot about the relative purchasing power of local markets, and indeed, what is an acceptable price for that product in that market.
Pretty much every day I think about how games are overpriced here in New Zealand. Normally games debut at NZ$99 and an astronomical $119 or $129 for Xbox 360 and Playstation 3 games.
So, I decided to apply the Big Mac Index (BMI) to game prices. Our data is from March 2006 and courtesy of oanda.com.
The BMI is indexed against the US dollar, which is convenient, since the US is also the centre of the game world.
So, apparently Big Macs cost US$3.10, and in New Zealand cost NZ$4.45 or in US$2.96 (rounded). So, we would be led to believe, that due to market conditions, lower cost of labour etc etc, that Big Macs are 4.52% cheaper in New Zealand than they are in the States.
Now, gaming.
Need For Speed: Carbon (Collectors edition) for the PC is $99.87 in New Zealand and $39.99 in the US.
The actual exchange rate that the BMI uses for this comparison is 1 USD = 1.505 NZD.
So, by taking the US price of 39.99 and simply multiplying it be the exchange rate, we determine that the the game should in fact be priced at NZ$60.18!
So, put another way, Need for Speed: Carbon (and all other similarly priced games) is priced 39.74% higher than what it should be, or 44% higher than what we’re paying for a Big Mac. That’s over a third more. Honestly, if we were paying $60 bucks for a game, sales would be double, triple or more than what they are. Very interesting.
No doubt, you’re interested in how your country compares. Below is the information for all the other countries included in the Big Mac index.
Some of the highlights that make me feel a bit better: Hungary, who pay 99.50% more than they should, Thailand who pay 97.28% more and the European union who pay 28% less than theoretically they should. Heck, if I lived in Hungary I’d be going for a drive across the border to get my games.
Btw, slight differences in figures are due to rounding errors. No major though. Also, prices are based on the PC collectors edition where possible, and I’ve used the rrp to also try and standardize things. Where the country you’re interested in is listed as being “N/A” (not available), it’s because I couldn’t find a price, usually because of language. If you want to give me a price and reference, I’ll add it to the table.
Also, I’ve had to change the table to an image to make it work. I have reference sites for all the prices, so just comment if you want me to provide the references.
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