Eponet said:
Since when did average cost and marginal cost become the same thing? Also, since when did companies begin lowering prices for each person based on what they were willing to pay?
l2read. I never said that companies lower price per person. Where did you pull that from? I said they set prices FOR EVERYONE where their marginal revenue equals marginal cost. Did you even
try the link I sent?
Common sense dictates that you keep your prices relatively stable, otherwise consumers won't buy because they will expect a future price drop. The marginal cost = marginal revenue is the point at which you should sell the very last unit if you constantly lowered prices based on what people are willing to pay for it. Sticking it up at marginal cost will net you a profit per unit sold of 0.
I see you haven't taken a college level economics course so let me give you a brief rundown of what about this is wrong. YES, companies will keep their prices stable (at least over long periods of time, several years). So your argument that you sell the last unit at that price while constantly lowering prices is invalid. You aren't lowering price, you are *fixing* a price that maximizes your profit. Perhaps I phrased if poorly, but you also haven't grasped the concept of marginal cost. Marginal cost varies with number of units sold. Price does not. If I produce one unit for sale, I still have to pay the development team, maybe the advertising team, and the graphics team, produce the disk, manual, box, art, and distribute it. My marginal cost on selling just one unit can still reach into the millions. Now let's say I produce two units. The marginal cost on that is much lower, an extra disc to burn the data to, a little more time on the box making machine, one more manual, and let's even ship it on the same truck. Costs a lot less right? Now lets make 4 million copies. Eventually you're adding in extra man hours to produce the extra materials, extra advertisements to tell the world about your product, you're shipping many many loads of products around the world, you need more capital to keep up production lines. In short, the cost to make "one more unit" is now increasing. Your marginal revenue is NOT. Selling one more game only brings in the price of one more game, which is the same price as the first game you sold. So for a game that sells at $50 you stop *producing* when your marginal cost equals $50, not stop lowering your price. Your *average cost* for each unit will be LOWER than the marginal cost of the final unit. Hence your profit equals (price-average total cost per unit)*quantity, not (price-marginal total cost)*quantity.
In fact, I even stated that the fixed costs (ie: Developing the game) are seperate.
"If they just left it there they'd simply suffer their fixed costs as a loss as their revenue only covers the cost of producing and distributing the games themselves."
Marginal cost
varies per unit sold EDIT: phrased that poorly. It varies with your total produced quantity END EDIT. I'm gonna say it until you go look it up.
Actually, you're somewhat right, I did make an error. All those fixed costs for development are part of the marginal cost of that very first unit produced. So it should be sold at around $10000000 or so. After that first unit, the cost of producing additional units falls and rises as more administration fees become necessary. Despite all this, and assuming that you somehow manage to sell that first unit to someone, you'll be breaking even.
You do not sell each game at a price equal to the marginal cost if you stopped producing at that unit. You sell each game at a price equal to the marginal cost of the
final unit. I'm gonna say it until you go look it up.
I might not be a genius, but I'm fairly certain that when all the costs of every single unit are equal to the revenue gained from every single unit, you're breaking even with a net profit of 0.
Yes you would. And I'm going to state again
that is not what you are doing. Every single unit is set at one price while your costs initially decrease (due to fixed costs, yes) then increase (due to increasing costs per unit)
You need to sell at more than it costs you to make something if you want to make any profit, that model only works to decide when to stop lowering the price for people who aren't willing to pay much for the good. It also assumes a different price for each individual.
In the real world, human behaviour (or as the wikipedia article calls it "Game Theory") destroys the possibility of anyone actually doing that.
And every unit except for the final unit sells at a price that is more than it cost to make it. In this model
you never change the price. Not for anyone. You simply stop producing when it is no longer worth it to produce. Game theory is something separate and I left it out to keep the model simple.
Seneschal said:
I just saw on the Extra Punctuation comments that you're Croatian. You comment now makes much more sense. Being one myself, I agree and understand Jack's views.
I made the same point four other times, but no one ever deigns to respond. It's just getting ridiculous. You cannot apply the same logic to a fat lazy cheap American and a poor Russian gamer. It would be much simpler, but it is fundamentally wrong.
I'm sorry that nobody agrees with your viewpoint of "Hey we're Eastern European so pirating is ok," but Numaiomul already brought up the whole "discrimination" point so I may as well point out that saying "Americans are bad for pirating, but we're not"
is just as discriminatory. Yes, you CAN apply the same logic to an American because if you create a double standard
it is discriminatory. It is
not discrimination to not sell your product at a price that is not profitable. That is bad business. And taking luxuries that you have not paid for is a crime. So stop saying "poor us, the downtrodden masses who have no money for hobbies, that other people enjoy." Eventually you have to grow up and realize that NOBODY gets EVERY LUXURY THEY WANT. The economy isn't exactly peachy here either, and I'm not saying it's anywhere near as bad as where you're at, but when times are tough you tighten your belt and go *without* some things that you enjoy even if it causes frustration, discomfort, or even outright PAIN. Maybe you have to live in the richest country in the world to see that, but it's the truth. WANTS are practically unlimited. If you ever managed to get cheaper games I am unconvinced that you will be satisfied with your lot in life. You'll simply move on to the next thing that you don't have and ***** about not having it until you find a way to get that for free without getting caught too, then justify away until people are bending over backwards to ensure your personal wants are met.
With an average American wage of $2600 per month, a typical $50 game costs you 2% of your monthly income. In Eastern Europe (and I'm talking affluent parts), the average wage is $800 and the equivalent game is $100, which is 12.5% of the monthly income. So, we pay as much as you for games that cost twice as much to get SIX TIMES less content. If Jack is from Romania or Albania, double or triple this difference. This means that with the effort to buy the 5-6 original games Jack has, he could have bought 50-90 games if he was American. He wouldn't feel the need to pirate, he would have already bought everything he wants. I bet half of you don't even own that many games.
Jack needs to rearrange his budget and stop spending so much on games then. I know very few people who own 50-90 games and I
definitely did not have that many at the age of 18. I have maybe 30ish on my PC and that's from saving and collecting over 15 years. So most of them are old. Really you sound just like every other teenager I know, "how come I don't get a car?" "Why can't I go somewhere fun on vacation like Australia?" You're just spoiled in a lower income bracket "Why can't I play as many video games as the American kids?" Coming online to complain is going to make everyone just say "life isn't fair. Get over it." And it isn't. So you should. I'm not going to act like your father and console your injured feelings. If your country is so terrible you should be scraping together what you can to GET OUT, not to play video games then whine about how it's not as good where you are.