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Re: How Much Has Bill Overcharged America?
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
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?
/_) /| /
/ i e t e r / |/ a g e l