Re: Some interesting economic facts

["Katharine M.J. Osborne" <kosborne@rocketmail.com>]

Yes, MS could be selling their products for a song, but
consumers have a certain perception of what software
should be valued at. What is a certain product worth to
them? What does the consumer think it should be worth?
That percieved value is shaped a lot by marketing, as well
as the standard prices set for each individual product
category. We are afterall the people willing to by
T-shirts for $20 that cost pennies to make.

KaOs
---Matt Deatrick <mattd@shocking.com> wrote:
>
> 	Have you ever heard of the term "increasing returns?"
It means that
> as you sell more items your profits go up rather than
down, as is usually
> the case(called diminishing returns). Software
development adn production
> follows these criteria: high initial cost(R&D), near
zero marginal
> costs(the cost of producing one more unit). The pricing
laws of economics
> state that price should equal marginal cost. This is due
to the fact that
> if you sold more you would lose money(your revenue from
one more unit would
> not exceed your production costs of one more unit-
negative profit) and if
> you sold less you would not be maximizing profit(you
could produce one more
> unit and make a profit because your marginal cost for
that unit would be
> less than your revenue). Ok, that was long. The point is
that marginal
> costs for software are almost zero! And given the nature
of increasing
> returns, M$, theoretically and economically speaking,
could sell software
> at marginal cost, or just above it, and still make a
healthy profit!
> 	Expensive, in this case, is simple greed.
> 	Matt

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