4 ms·

This assumes an infinite market. If you address a market with only 10000 consumers, it's unlikely competition can succeed with prices assuming 100000 sales.

by forty 4y ago

robbrown451 4y ago
It does not assume an infinite market, it just assumes a larger market than your example. Everything still applies if you just adjust the numbers downward or upwards to match whatever particular market you are speaking of.
frognumber 4y ago
The size of the market generally scales with your marketing and distribution capacity. To the point of the original article, smaller companies have a hard time competing due to less reach. That's missing. If I run Disney and can reach 4 billion people, and your 5-person shop can reach 50,000 people, I can either price my product 5 orders of magnitude lower than you, or invest an extra 5 orders of magnitude into development. That's expensive. If I want to comply with Khazak tax laws, provide support there, and reach distribution channels there, I probably want to pay for an office there. That office might have four people, regardless of whether we sell 1 product or 100 products. A lot of what app stores do is provide that kind of reach to all businesses, driving pricing down. Personally, I'm a big fan of government grant funding for free software. It seems like the OS, office suite, video editor, and similar tools ought to have a baseline versions available to anyone for free.
NeoTar 4y ago
Which can also create another problem. The second company might think there is a market for 100k users, and price accordingly at $10, but only sell 10k copies and go out of business. Now, however, people see the product as only being worth the lower price point of $10, and won't pay $100 for it anymore. So company A can only sell 1000 copies at $100, and also goes out of business.

4 ms·

This assumes an infinite market. If you address a market with only 10000 consumers, it's unlikely competition can succeed with prices assuming 100000 sales.

by forty 4y ago

This assumes an infinite market. If you address a market with only 10000 consumers, it's unlikely competition can succeed with prices assuming 100000 sales.

robbrown451 4y ago
It does not assume an infinite market, it just assumes a larger market than your example. Everything still applies if you just adjust the numbers downward or upwards to match whatever particular market you are speaking of.
frognumber 4y ago
The size of the market generally scales with your marketing and distribution capacity. To the point of the original article, smaller companies have a hard time competing due to less reach. That's missing. If I run Disney and can reach 4 billion people, and your 5-person shop can reach 50,000 people, I can either price my product 5 orders of magnitude lower than you, or invest an extra 5 orders of magnitude into development. That's expensive. If I want to comply with Khazak tax laws, provide support there, and reach distribution channels there, I probably want to pay for an office there. That office might have four people, regardless of whether we sell 1 product or 100 products. A lot of what app stores do is provide that kind of reach to all businesses, driving pricing down. Personally, I'm a big fan of government grant funding for free software. It seems like the OS, office suite, video editor, and similar tools ought to have a baseline versions available to anyone for free.
NeoTar 4y ago
Which can also create another problem. The second company might think there is a market for 100k users, and price accordingly at $10, but only sell 10k copies and go out of business. Now, however, people see the product as only being worth the lower price point of $10, and won't pay $100 for it anymore. So company A can only sell 1000 copies at $100, and also goes out of business.