You just re-discovered the average cost and marginal cost difference. Let’s say it cost 10,000 dollars to develop software X. Once developed, X can be reproduced and sold for 10 cents per copy. The marginal cost therefore is 10 cents. If companies sold at 11 cents they would make a profit of one cent per product. Yet before they broke even in total, they’d have to sell 1,000,000 copies. Then to get even a normal ROI on the money they’d have to sell another 10,000 (ignoring NPV).
If software cannot be priced higher than the marginal cost (and closer to the average cost), then it will never be profitable to develop in the first place. The solution to the problem is differential pricing. You want to price to relatively poor people X at a price closer to the marginal cost and to rich people X at a price closer to the average cost to produce instead of the marginal cost.
This is why there are different pricing for firms as opposed to say individuals.
This website is a place for people who want to move past shady thinking and test their ideas in a
court of people who don't all share the same biases. Our goal is to
optimize for light, not heat; this is a group effort, and all commentators are asked to do their part.
The weekly Culture War threads host the most
controversial topics and are the most visible aspect of The Motte. However, many other topics are
appropriate here. We encourage people to post anything related to science, politics, or philosophy;
if in doubt, post!
Check out The Vault for an archive of old quality posts.
You are encouraged to crosspost these elsewhere.
Why are you called The Motte?
A motte is a stone keep on a raised earthwork common in early medieval fortifications. More pertinently,
it's an element in a rhetorical move called a "Motte-and-Bailey",
originally identified by
philosopher Nicholas Shackel. It describes the tendency in discourse for people to move from a controversial
but high value claim to a defensible but less exciting one upon any resistance to the former. He likens
this to the medieval fortification, where a desirable land (the bailey) is abandoned when in danger for
the more easily defended motte. In Shackel's words, "The Motte represents the defensible but undesired
propositions to which one retreats when hard pressed."
On The Motte, always attempt to remain inside your defensible territory, even if you are not being pressed.
New post guidelines
If you're posting something that isn't related to the culture war, we encourage you to post a thread for it.
A submission statement is highly appreciated, but isn't necessary for text posts or links to largely-text posts
such as blogs or news articles; if we're unsure of the value of your post, we might remove it until you add a
submission statement. A submission statement is required for non-text sources (videos, podcasts, images).
Culture war posts go in the culture war thread; all links must either include a submission statement or
significant commentary. Bare links without those will be removed.
Jump in the discussion.
No email address required.
Notes -
You just re-discovered the average cost and marginal cost difference. Let’s say it cost 10,000 dollars to develop software X. Once developed, X can be reproduced and sold for 10 cents per copy. The marginal cost therefore is 10 cents. If companies sold at 11 cents they would make a profit of one cent per product. Yet before they broke even in total, they’d have to sell 1,000,000 copies. Then to get even a normal ROI on the money they’d have to sell another 10,000 (ignoring NPV).
If software cannot be priced higher than the marginal cost (and closer to the average cost), then it will never be profitable to develop in the first place. The solution to the problem is differential pricing. You want to price to relatively poor people X at a price closer to the marginal cost and to rich people X at a price closer to the average cost to produce instead of the marginal cost.
This is why there are different pricing for firms as opposed to say individuals.
More options
Context Copy link