4 ms·

Obscene? What's the "correct" markup? I sell digital, single-player video games. My manufacturing cost is zero and markup is infinite.

msvan 13y ago
Your marginal distribution cost is zero, but the manufacturing cost to design and develop the game is clearly not zero. The issue is that just because you can charge a lot doesn't mean you should. Although capitalism rarely works that way.
- forrestthewoods 13y ago
  Perhaps a fair price point would be one that generates enough revenue to cover development costs and perhaps fund the next project as well? That sounds pretty reasonable.
- quanticle 13y ago
  I think talking about capitalism, or rather, "free market", in the context of drug production is laughable. Free markets, as conventionally defined, have two characteristics: 1. Producers and consumers are both equally informed 2. There are so many producers and so many consumers that no single producer or no single consumer is able to appreciably change the market price Neither of those assumptions hold with the the drug market. Drug makers are massively more informed about the benefits and side effects of their drugs than I am. And there aren't that many drug manufacturers - and ongoing mergers keep shrinking the pool. In reality, the drug market is a barely regulated oligopoly, where a few large players manipulate the price signal to coordinate behavior so that they can move in relative unison to screw over the consumer. It's just like oil companies or airlines.
anigbrowl 13y ago
The correct markup is cost + opportunity cost, known in economics as 'normal profits'. Your manufacturing cost is not zero at all. You have significant fixed costs; your marginal cost is zero, or so close to it as to be negligible. Your average fixed costs fall with each copy sold, but unless you consider your time and labor entirely worthless you have to sell quite a few copies before you break even. Also, since your game is a discretionary expense, there's no significant opportunity cost to the non-purchaser, whereas the opportunity cost to someone who eschews or can't afford to purchase medication might be the person's life.

msvan 13y ago

Your marginal distribution cost is zero, but the manufacturing cost to design and develop the game is clearly not zero. The issue is that just because you can charge a lot doesn't mean you should. Although capitalism rarely works that way.

forrestthewoods 13y ago
Perhaps a fair price point would be one that generates enough revenue to cover development costs and perhaps fund the next project as well? That sounds pretty reasonable.
quanticle 13y ago
I think talking about capitalism, or rather, "free market", in the context of drug production is laughable. Free markets, as conventionally defined, have two characteristics: 1. Producers and consumers are both equally informed 2. There are so many producers and so many consumers that no single producer or no single consumer is able to appreciably change the market price Neither of those assumptions hold with the the drug market. Drug makers are massively more informed about the benefits and side effects of their drugs than I am. And there aren't that many drug manufacturers - and ongoing mergers keep shrinking the pool. In reality, the drug market is a barely regulated oligopoly, where a few large players manipulate the price signal to coordinate behavior so that they can move in relative unison to screw over the consumer. It's just like oil companies or airlines.

anigbrowl 13y ago

The correct markup is cost + opportunity cost, known in economics as 'normal profits'. Your manufacturing cost is not zero at all. You have significant fixed costs; your marginal cost is zero, or so close to it as to be negligible. Your average fixed costs fall with each copy sold, but unless you consider your time and labor entirely worthless you have to sell quite a few copies before you break even. Also, since your game is a discretionary expense, there's no significant opportunity cost to the non-purchaser, whereas the opportunity cost to someone who eschews or can't afford to purchase medication might be the person's life.