Now I think we're getting somewhere. I think your reasoning is sound, but I disagree with your conclusions. Suppliers are not going to be making a decision to supply X number of units or Y number of units but instead to supply at all. I think you're discounting revenues generated after point of sale and I'm not sure why. Yes, I agree that 0 is a sale price below marginal cost in every instance (though if you want to look at marginal cost of digital goods, it is close to or at exactly 0), but why don't you count downstream revenues? Regardless of whether or not you feel the industry is in a sustainable point or at a point of equilibrium, surely the existence of successful test cases should demonstrate that there are revenues after the point of sale to be considered.
F2P economies rely on there being an uncapped price ceiling, not on the price floor being a profitable or sustainable equilibrium; this is probably why some people refer to it as a 'bubble', because it requires the attraction and retention of 'whales', of whom there are a fixed number.
All that said, I'm still confused as to how this discussion sprouted.
I said I believe the $0.99 to be less than the 'worth' of the product and that the mobile market has devalued that 'worth' in consumer expectations, not adjusted to reflect actual values.
I disagree that true Pareto Efficiency is zero sum. Yes, the classical definition is that "no one can be better off without someone else being worse off," but there are very clear exceptions. Pareto efficient outcomes can be achieved with compensation or transfer payments when the total amount of benefit gained exceeds the amount of which the disadvantaged party loses.
Like most economic concepts pareto efficiency is a myth that exists solely to derive hypothetical models from, and is never fully achievable; I've seen it used a number of times as an aspirational state for 'perfect' competition in a market though.
I've never seen pareto efficiency talked about in this sense, though, because obviously we should be looking at two separate axes-- suppliers vs. demanders, or two separate allocations of some resource...why are we talking about supplier vs. supplier? That would hold true for any competitive market. Any producer of widget should collude with every other producer of widget to produce a higher cost widget. I'm not seeing the applicability. But, regardless, I'm still confused as to what we're talking about.
All markets would benefit from collusion, but human nature and game theory being what it is, any sufficiently large market (large as in number of suppliers of goods rather than value) collusion becomes impossible, because strategic competition will always strive for pareto efficiency - ie knocking a competitor out of the market.
I said that the true value of something is what people are willing to pay for it. You are suggesting that the price should be determined by cost of production and profit margin. Why doesn't this apply in any other non-mobile, digital market?
It does, but many other DD markets have solved the discoverability issue better than mobile gaming has (which is the incentive to price dump, as the current market is feast or famine based on whether you make it to a top ten list), and have also evolved from previous retail presence in a way that mobile has not;
- A song on iTunes costs slightly less than a tenth of what a 10-track CD used to cost to purchase, in line with the savings made by switching to DD.
- An eBook costs slightly less than what a book used to cost to purchase, in line with the savings made by switching to DD.
- A DD movie rental costs slightly less than a physical rental did when those were available
These are mature industries that know their absolute bottom lines for a sustainable business.
"traditional" games DD prices are currently priced too highly (outside of Steam firesales) due to fear of upsetting retail, particularly in the console space.
I don't think the physical market is appropriately defined as being comprised of homogenous goods either, mind you, at least not in a classical sense. Any non metallurgical or energy product....or super basic industrial machinery product...is going to struggle to meet that definition.
Like I said above with pareto efficiency, all economics models are hypothetical constructs for ease of analysis and are never expected to be seen in real life, which is why there are so many different models of directly contradictory conclusions, as each attempts to model some different aspect of the myriad of human behaviours that exist and factors that contribute to the behaviours of producers and consumers, which are often both irrational and unpredictable.
The only guarantee in economics, is that eventually the forecasts are wrong.
Just remind me...what do you want for the price of games?
I think there should be room in the market and in consumers expectations for flexible pricing; based on historical pricing and the savings of a DD model, a price scale ranging from $0 to $40 would seem fairer and more sustainable, with the majority of titles released falling along a bell curve at the $15-$25 range.
Meanwhile, said "natives" feel that Iwata ignores their opinions.
