Re: Some interesting economic facts

[Matt Deatrick <mattd@shocking.com>]

	Yes, and for most software the prices are declining. My main point
was that in economics Prices should equal marginal costs(the cost to 
produce one more unit). I am not in the mood to go through the whole thing
again, but suffice it to say that prices are above marginal costs in most
cases, even where they have fallen. Even though marginal costs in the
software industry are so near to zero as to be inconsiquential
theoretically. The argument, then, is that the reason M$ has had 20% plus
profit margins, ie the reason Gates is so grossly wealthy, is because he is
abusing our perceptions of quality by tricking the market. If it isn't
expensive it doesn't work? Not in M$'s case.
	Matt 


On Wed, 22 Apr 1998, Mitch Stone wrote:

> In reply to Katharine M.J. Osborne's message sent 4/22/98 10:54 AM:
> 
> >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.
> 
> I apologize in advance if I've missed this in the earlier posts in the 
> thread, but what about the notion of "value added?" A lawyer may be able 
> to easily charge you $200 an hour if he can keep you out of jail, even 
> though his training and experience may be no greater than, say, a 
> librarian. This is, I'm led to understand, one reason why legal fees 
> remain high in the face of a glut of lawyers. (If geese form a gaggle, do 
> lawyers form a glut? Probably.)
> 
> Likewise, how much is it "worth" to replace a typewriter with a good word 
> processing application (which leaves out MS Word, but never mind)? The 
> "value added," and thus the price, is unrelated to the cost of 
> production, and probably ought to be relatively high.
> 
> So my question is this: trading a typewriter for a word processing 
> application would expect to carry a large value added. But shouldn't it 
> be larger than trading one word processing application for another, which 
> is mainly what we're doing today? In other words, shouldn't the cost of 
> word processing applications be declining?
> 
>    Mitch Stone
>    Editor, Boycott Microsoft
>    http://www.vcnet.com/bms 
>  +---
>    While we're all very dependent on technology, 
>    it doesn't always work --- Bill Gates
> 
>