Obviously this is totally wrong, for reasons others have pointed out on HN. But it contains an interesting germ of truth: Consumer psychology around pricing get

Obviously this is totally wrong, for reasons others have pointed out on HN. But it contains an interesting germ of truth: Consumer psychology around pricing gets complicated. A couple years ago, my local bagel store raised its prices. When they did, they put a notice next to the counter saying, “To our valued customers: Recent increases in the price of wheat have forced us to raise prices. We hate to do this, but it’s the only way we can continue to pay our rent. This will be our first price increase in almost eight years. We hope you understand our situation.” According to Econ 101, this sign was a waste of time. Customers will look at the new prices and decide whether or not to buy bagels at those prices. In fact, according to Econ 101, the bagel store might just as well have put up a notice saying, “Dear customers: We are raising our prices because we’d like to increase our profits, and we suspect that many of you are not very price-sensitive.” Of course, no one conducted an experiment to see what effect the sign had on business, but I’m prepared to bet it helped minimize the drop in business from the price hike. Econ 101 has no concept of “fair share,” but consumers do, and they’re willing to take losses to prevent someone else getting more than what they perceive to be his fair share. (http://en.wikipedia.org/wiki/Ultimatum_game http://en.wikipedia.org/wiki/Ultimatum_game) This isn’t right or wrong—it just is. If you’re selling physical goods, you should sell them at whatever price enables you to maximize your profits, just as Econ 101 suggests. But you should also suggest, in the way you talk about your product, that the cost is determined largely by the cost of your inputs. If you’re selling intellectual property, well, it’s a bit more complicated because everyone knows the inputs don’t bear on the marginal cost of each item. But it might be helpful to let everyone know that you’re not getting rich. Let your customers know you’re trying to support a family as an independent software developer, or that you still work a day job to allow you to make music. Don’t let people think you’re ripping them off. Of course, when your product is easily available for free on the black market, as is the case with piracy, none of this makes much difference. Consumers prefer to pay the lowest possible price. Econ 101.