Re: Some interesting economic facts

[Mitch Stone <mstone@vc.net>]

In reply to Matt Deatrick's message sent 4/22/98 5:11 PM:

>	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.

This is more or less what I am saying. Microsoft can only keep its 
margins up by creating false economies, and it needs the OS monopoly to 
do that effectively. They must realize that the public will eventually 
catch on to the fact that a new version of Office doesn't really amount 
to a $400 gain in productivity, and begin to refuse to fork over. Even a 
software monopoly can't force customers to buy essentially the same 
product over and over again.

But, if the software monopoly can continually churn the market by 
snapping the OS rug (excuse the mixed metaphor), and/or by hiding the 
costs of their products in OEM packages, then the consumer really has no 
choice in the matter, or finds himself buying the veritable pig in a poke.

Or so I suppose.

   Mitch Stone
   Editor, Boycott Microsoft
   http://www.vcnet.com/bms 
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