Re: How Much Has Bill Overcharged America?

[Pieter Nagel <pieter.nagel@epiuse.co.za>]

  On Fri, 21 Nov 1997, charles mueller wrote:
  
  >         Pieter Nagel has raised a super question:  "The majority of consumer
  > software is vastly OVERPRICED."  By how much?
  
  Ever since your "economies of scale" post I have had the uneasy
  feeling that we're kind of missing the mark somewhere; your
  question about overpricing relates to that.
  
  Let me first try to understand the thrust of your economies of scale
  question from an antitrust perspective: The goal of antitrust is to
  protect consumers, competition and the economy against one particular
  threat, monopoly. The theory is that the biggest threat to consumers
  is overpricing. As you say:
  
  >         The overcharge is the measure of "damages" in antitrust
  
  Supposing that the maximum economy of scale in an industry is found
  when a company has, say, 8% of the market share. If the entire
  industry consists of little companies with no more than a 2% share
  each, they are operating at an inneficient and costly level;
  antitrust is then not relevant..
  
  If, however, greater economy of scale is found at all level up to
  100%, we have a "natural monopoly". The theory is that by employing
  antitrust to prevent a company from reaching that size, you are
  preventing consumers from enjoying further price decreases which
  could only be realised by a monopoly. But in such industries stricter
  government control is needed, because left to their own devices the
  monopolies would not realise the theoretical minimum price. 
  
  It is in this context I understood you question about software
  economies of scale.
  
  But I am increasingly uncomfortable with price and overcharge as
  sole, or major, measures of damage.
  
  If I may allow myself to be a little bit speculative: we are moving
  deeper into a so-called Information Age, and by extension an
  Information Economoy. Information in itself is becoming an
  economically valuable resource. We are reaching the point were
  information becomes a medium of economic exchange; and I'm not only
  talking about e-cash.
  
  Minimizing price is no longer a sole measure. Maximizing information
  is also.
  
  All this sounds a bit fuzzy. What precisely do I mean by
  "information"? I think that this relates to issues such as
  interoperability, openennes, and even consumer choice. It is in this
  context that something like Linux with is open source code, or the
  pure Internet protocols for whom anybody can download the entire
  specifications and develop compliant applications for, have more
  "information value" than a similar, closed product by another vendor.
  Even if, for the sake of argument, Linux or the protocol specs
  cost some money and the propretary system cost less.
  
  I'm struggling to put this concretely, precisely because I believe it
  is a fundamentally new factor which we never really had before in
  history. I suppose there were all kinds of economic issues that were
  never realised until people moved from bartering to money; the same
  when the economy became industrialised, and maybe now we are in the
  midst of a another juncture point?
  
  
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