I was getting a little concerned about the economic arguments, until I read this post. But, as with any relationship, and let's not kid ourselves, economics is all about relationships, there are two sides. The previous post was an excellent discussion of the seller's side.
On the buyer's side, there's a little concept known as "willingness to pay" (WTP). This really screws up retailers. Retailers may be willing to sell at their marginal cost, in the long run, but if there are no buyers at that price point, well, all the costs are lost. So, the vendor lowers the price until units start moving, hopefully minimizing the extent of the loss.
The demand for a given product across a range of prices is called the demand curve, and with any curve, we can do some calculus. Some people may be willing to pay high prices for a product. Let's assume these are the European & North American markets, with some distribution within them. Some people, for a variety of reasons, may be willing to pay low prices, but not high prices. Let's assume these are the Asian markets. So, economic theory tells us that for a vendor to maximize revenue, they will charge every INDIVIDUAL customer exactly what they are willing to pay. But this isn't feasible yet (except in auctions), so markets are aggregated around some 'ideal' price and strategy.
So, from this side of the coin, game publishers selling into China, to maximize revenue (independent from return on investment) can only charge what the market will bear. Competition obviously plays a huge role in that determination. Remember, the key here is WILLING TO PAY, not what they SHOULD pay. And this argument has been well covered previously, too: if Joe on the corner is selling an illegal copy for $2, how much more are people willing to pay for a legit copy? What can I do with that legit copy to maximize willingess? Bundles? Special features?
Anyway, I think the scenario has been well described. And as the previous poster said, let's make sure we get our economics straight. These are some really powerful tools if understood and applied correctly.
Slashdot Mirror
Long live sneakernet!!
I was getting a little concerned about the economic arguments, until I read this post. But, as with any relationship, and let's not kid ourselves, economics is all about relationships, there are two sides. The previous post was an excellent discussion of the seller's side.
On the buyer's side, there's a little concept known as "willingness to pay" (WTP). This really screws up retailers. Retailers may be willing to sell at their marginal cost, in the long run, but if there are no buyers at that price point, well, all the costs are lost. So, the vendor lowers the price until units start moving, hopefully minimizing the extent of the loss.The demand for a given product across a range of prices is called the demand curve, and with any curve, we can do some calculus. Some people may be willing to pay high prices for a product. Let's assume these are the European & North American markets, with some distribution within them. Some people, for a variety of reasons, may be willing to pay low prices, but not high prices. Let's assume these are the Asian markets. So, economic theory tells us that for a vendor to maximize revenue, they will charge every INDIVIDUAL customer exactly what they are willing to pay. But this isn't feasible yet (except in auctions), so markets are aggregated around some 'ideal' price and strategy.
So, from this side of the coin, game publishers selling into China, to maximize revenue (independent from return on investment) can only charge what the market will bear. Competition obviously plays a huge role in that determination. Remember, the key here is WILLING TO PAY, not what they SHOULD pay. And this argument has been well covered previously, too: if Joe on the corner is selling an illegal copy for $2, how much more are people willing to pay for a legit copy? What can I do with that legit copy to maximize willingess? Bundles? Special features?Anyway, I think the scenario has been well described. And as the previous poster said, let's make sure we get our economics straight. These are some really powerful tools if understood and applied correctly.