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If people are paying for a subscription then the market is clearing. Or in other words the customer has decided that they are better off with the service than w
by wkrause 9y ago
If people are paying for a subscription then the market is clearing. Or in other words the customer has decided that they are better off with the service than without.
I think part of why people dislike subscription models is due to the reduction of their personal consumer surplus. Under a one time purchase model, power users who get value out of a product for many years get a nice windfall. Users who only need or use the product for a shorter period of time have a smaller consumer surplus since they're paying the same price.
A subscription model almost functions as a form of price discrimination. You end up charging more to those that get value out your product for a longer period of time. I'd imagine this has the effect of increasing producer surplus at the expense of consumer surplus.
In theory every consumer has a one time price such that they would be indifferent between a perpetual model and the subscription model. The issue is there isn't a way for the supplier to segment the market in a way that is as efficient as the subscription model for every user. If you offer the two models together you create an adverse selection problem where only consumers who estimate a greater consumer surplus from the one time price will choose that option, lowering overall revenue for the supplier.