On The Mysteries Of PC Computer Game Pricing

Thanks to The Adrenaline Vault for its editorial discussing the recent, seemingly strange retail pricing of PC videogames. The author explains that he has "reviewed a series of recent PC titles with an initial retail price of either $19.99 or, at most, $29.99... This is occurring even as console versions of the same games are selling for around $49.99." He concludes: "From a consumer standpoint, this new pricing pattern is heaven. You can buy more hours of quality virtual interactive entertainment for a lower fee than ever before... The one downside is the ability to get titles released more than six months ago, as small profit margins have led to diminishing shelf space in ever-contracting retail stores." But is there indeed a danger that "smaller [PC-developing] companies often can't handle the loss of revenues from lowered prices, so too dramatic a drop might jeopardize their existence"?

Comments

Price curves

[Henry V .009]

"smaller [PC-developing] companies often can't handle the loss of revenues from lowered prices, so too dramatic a drop might jeopardize their existence"

Review of Econ 101 for those slashdotters that need it:

Lowering the price of a product does not inevitably lead to lower profits. Nor does raising the price lead to higher profits. The higher priced that a product is, the fewer people willing to pay for it, and vice-versa. Theoretically, there is an optimum price that will bring in the most profit for a company.

There should be NO loss of revenue from a price drop made to bring the price closer to the optimum. So unless the argument is that game companies have lowered prices for reasons of insanity, then there should not be much to worry about simply from the fact of lower prices. They are just adjusting closer to the optimum profit point.