Who should set the price for the original sale of digital products? 2

[diogenes10]

This started with a conversation in another thread.
The other thread is already quite long, this is off topic in that thread, and it may be considered a business rather than ethics item, in which case i did not want it to get the other interesting thread pulled.

There are economic issues here in terms of cost and return.
However I believe that posters in various threads also start from a premise that it is an ethical issue in regard to such things as the quantity of profit, the incentive to make the manufacturing processes as efficient as possible, the functionality of the product and marketing techniques such as increasing the quanity of items in one package to justify a higher price regardless of quality, functionality, etc of the total package.

 

[skiflyer]

This one's too easy in my eyes. Whoever is selling the product has the right to determine the price. Assumably this is someone who paid the costs for development, or distribution, or whatnot... or someone who has purchased the rights from that person. If they want to charge a million and a half for a web browser that's their business... not mine because I feel I have the right to a web browser.

Same with music, movies, and any other product be it digital or not. Does this ever get tricky? Sure it does... only in one case though... illegal monopolies. But those shouldn't be fixed by mandating prices imo.

-Rob

 

[edfair]

Good old freemarket economics:
The seller sets the sale price,
The buyer sets the purchase price.
digital, smidigital.

That being said, I think there is some need for oversight but I haven't figured out what it should be or who should do it. Case in point, lifesaving drugs with patent priced way above manufacturing cost.

Ed Fair
Any advice I give is my best judgement based on my interpretation of the facts you supply. Help increase my knowledge by providing some feedback, good or bad, on any advice I have given.

 

[sleipnir214]

I don't think I can summarize free-market economics better than edfair.

The only thing I'm worried about is the concept of oversight. One must approach the idea of pricing oversight with great trepidation and circumspection.



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[CajunCenturion]

Like the two previous posts - the owner has the right to set the price to whatever they wish. Whether or not the business will be successful at the price is based on what the market will bear.

As far as oversight, a free market competitive economy will provide such oversight, and the government will provide such oversight in the event anti-trust laws are violated, or collusion is detected amongst the parties.

Good Luck
--------------
As a circle of light increases so does the circumference of darkness around it. - Albert Einstein

 

[CajunCenturion]

ok - 3 previous posts

Good Luck
--------------
As a circle of light increases so does the circumference of darkness around it. - Albert Einstein

 

[diogenes10]

ok i'm a slow and unclever thinker.
Perhaps the question I'm trying to ask is more like
Is it ethical to let the maker of a digital product determine its value to the buyer?

1) One response above sounds like maybe not.

2) The attitudes of Patrick Kolla and other freeware and some shareware authors would seem to indicate either no, or there are at least some limits for the maker in relation to characteristics of the buyer beyond how much money can be extracted from them.

3) Attitudes and actions I've seen discussed on this site seem to me to imply that there are many users of digital products who feel that makers of those products have gone far beyond an ethical valuation in setting their price.

 

[edfair]

How about
"Is it ethical for us to allow a sole source supplier hold a gun to our collective heads?"

I think not, but I'm not sure of the steps to be taken other than in my own life I control the outgo.

In that respect I like the open source method.

But then there is the expanded "Supreme Court" ruling about consenting adults.



Ed Fair
Any advice I give is my best judgement based on my interpretation of the facts you supply. Help increase my knowledge by providing some feedback, good or bad, on any advice I have given.

 

[KornGeek]

I agree with edfair that it seems like some oversight might be useful in some areas, but like sleipnir214, I'm more than a little worried about how this could be implemented without causing bigger problems than we're starting with.

On some level, I agree with the economic idea of letting the market dictate the price. However, I think there is some ethical wiggle room here. I'm just not sure where the line is.

Following the example of lifesaving drugs, do companies have any sort of obligation to make these avialable at a reasonable price? The need to be able to recover their research and development costs, but how much should we allow for pure profit? Health care expenses are through the roof, and the price of medications adds to it. On the other hand, their patent is only good for a limited time, and then other companies will begin making knock-offs. Therefore the company that produces it originally needs to make as much profit as possible while they can.

That is the dilemma as I see it. Where should we try to find a balance between the good of society and the good of the company? This is one of those issues where I just don't know how I feel. I can see both sides and they both make sense.

Also, how is an organization like the RIAA substantially different from collusion? It seems to me like they operate in ways that at least border on being unethical and/or illegal. For instance, it seems to me like there is some degree of price fixing between the major companies. Is this simply a case of what the market will bear or is it that this is the price the industry chose for us?

I'm not really making a point here. I'm just giving some food for thought.

 

[CajunCenturion]

There is a big difference between "the maker of a digital product determine its value to the buyer", and "the maker of a digital product determine its price to the buyer".

Ethics can only come into play if there is some element in the equation, outside of the normal free market, that manufacturer can take unfair advantage of. Quite obviously, a monopolistic environment in one example, as is collusion among competitors. In these situations, the manufacturer has, per edfair, the "gun to the head", and can inflate the prices. That's when the anti-trust laws come to the defense of the buyers. But this an unethical pricing method, but not necessarily an unethical valuation of the product.

To unethically over value the product, the manufacturer would have to artificially increase the product's perceived value. One way would be for the manufacturer through false advertising and unethical marketing campaigns, convince you that you have a problem, and that they have the solution. An example could be (I say again - could be) an anti-virus software product where the author convinces you of the existence of such a virus that only their program can protect you from, and of course, knowing your responsibility to secure your systems, you naturally purchase the protection. You have bought perceived value.

Of course if they had the virus, they could release it, but that's a whole different ballgame.

In summary, you can have both unethical pricing, and unethical valuations, but they are not the same thing.


Good Luck
--------------
As a circle of light increases so does the circumference of darkness around it. - Albert Einstein

 

[diogenes10]

I think I have to disagree with the concept of valuation and pricing being different because the value/price assigned by the manufacturer/creator determines the transfer value/price which the purchaser has to allocate for that item - in most cases. In cases where the maker chooses to let the purchaser assign a value, or where the purchaser has the financial power to force adjustment in the value assigned for a transfer, then there is an issue of ethical behavior on part of the purchaser. As an example for that, I wonder how many people that recommend or use various boot disk sites leave any money there to help out the site originators?

As far as the price itself, there are all kinds of ethical issues involved in setting it relating to such things as how the business is run, expenses are managed, and perception of ethical returns and how they are established.

 

[KornGeek]

CajunCenturion,
I like the distinction you are making between pricing and valuation.

I have also heard people use Beanie Babies, baseball cards, and other collectibles as examples of unethical valuation where the manufacturer uses artificial supply limitations to make parts of the collection unusually rare.

California had a problem in recent years with energy suppliers limiting the supply in order to charge the state higher prices. This qualifies as both unethical valuation (by falsely limiting the supply in order to increase value) and unethical pricing. Last I heard criminal charges were being discussed.

 

[sleipnir214]

Overcharging for necessary items is unethical. Take examples of price-gouging on building materials in the U.S. Gulf Coast after hurricanes -- there's always some idiot that forgets he has to live with the people he's screwing.

And I don't want to get into the California energy debacle. There are so many culpable parties in every part of that situation that just about everyone but the end-consumers should go to jail.

But I don't think manipulation of a market by a manufacturer is necessarily unethical. No one needs Beanie Babies or baseball cards -- they are a luxury commodity, and as such their value is artificial anyway. But in the explicit cases of Beanie Babies and baseball cards, the manufacturers have not benefitted from the scarcity by charging more for the scarce items -- collectors charge each other inflated prices for them. It can be argued that all the manufacturers are doing is enhancing the value of their collectors' collections.

And that, after all, is the crux of anti-monopoly law. The monopoly must behave in such a way as to itself benefit from the fact that it can flex its muscles in a market.

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[cdogg]

diogenes10,
"Is it ethical to let the maker of a digital product determine its value to the buyer?"

Sure it is. It's natural for consumers to desire lower prices for products and services that they want. Necessity is another venture that I won't get into.

If a business charges too much, consumers will likely buy less. The opposite is also true. Because of this interdependence, any price that a "successful" business charges should fall within the realm of reason. I see the pricing decision as a question of success more so than a question of ethics. The "makers of digital products" as you put it, may be overcharging but there are still millions of people that invest everyday.

Are they forced to? No.

__________________________________________________

~cdogg
[tab]"The secret to creativity is knowing how to hide your sources"
[tab][tab]- A. Einstein

 

[edfair]

sleipnir,
How about we don't let the end users off so lightly. Maybe not felonies, but at least misdemeanor terminal stupidity for some of their energy consumption practices.

Ed Fair
Any advice I give is my best judgement based on my interpretation of the facts you supply. Help increase my knowledge by providing some feedback, good or bad, on any advice I have given.

 

[CajunCenturion]

Just to clarify, I distinguish between the value and the price because the value is determined by the buyer and the price is set by the seller.

As a general rule, when the value to buyer is equal to or greater than the price, then a sale takes place. When the value is less than the price, a sale generally does not take place. The other key variable here, is that the value will vary from buyer to buyer. As an example, I wouldn't spend 1 dollar for a Jovial compiler because it has no value to me. However, my hypothetical neighbor, who programs in Jovial, would be happy to pay 100 dollars for the very same language compiler, because it would be very valuable to him in the kind of programmer he does.

That's why I feel that price and value are not the same.

Good Luck
--------------
As a circle of light increases so does the circumference of darkness around it. - Albert Einstein

 

[edfair]

cc,
in the free marketplace, with multiple suppliers, and no captive buyers, you are right.
But the major premise so far has been those price/value glitches created by abnormal needs of captive buyers where the perceived value exceeds the normally expected free market price. And the freedom of the supplier to charge what the market will bear. And what happens when the supply dries up, or the demand increases?

This is one of those occasions where I can ask better questions than I can give answers.

Ed Fair
Any advice I give is my best judgement based on my interpretation of the facts you supply. Help increase my knowledge by providing some feedback, good or bad, on any advice I have given.

 

[diogenes10]

When demand increases, there will be some combination of increased production by the legal owner of the product and theft and piracy just as there is now.

The supply drying up is a little harder-depends on the age and type of the item. If the item is a looser in a battle to become a main line product, lots of people will follow the main line and not care. The devotees will do stuff like user groups, forums on tek-tips, and seek out sources on places like the on-line auctions.

If it's a main line product then I think we're right back in the ethics issues of who sets the value for exchange because I think from a user point of view there are questions as to how much product change is valuable, useful increases in utility, function, etc. and how much is creative whizbang flash, the creation of which is driven by the need to phase out something and replace it with a new product in order to keep revenue streams up to meet financial expectations of investors and executives. Just today I have observed a networking thread and a hardware thread which, in my opinion, present solutions based on current technology which far exceeds the real needs of the users, and as a result, increases their costs.

The company that I work for will be forced in the next two years to make major software and hardware upgrades because of major software companies' planned obsolesence policies. This seems to me to be an example of a situation in which a product creator determines a set of values which satifisfies their wants and then forces it upon users.

I also see software resellers generating revenue streams in training for enhancements and changes. Or from doing what users can no longer understand how to do.

I think there is a serious ethical question here in regard to the cost to society of unnecessary change done from a profit motivation of the seller/creator without any consideration of value to or by the purchaser/user. And -- I dont see that there is a separation of seller price/value and user price/value because the user doesn't have much choice -- the seller sets the value -- and if the user wants to live -- ie get a job or do business (with other using the products) -- they either have to steal or accede to the price.

 

[guestgulkan]

The company that I work for will be forced in the next two years to make major software and hardware upgrades because of major software companies' planned obsolesence policies. This seems to me to be an example of a situation in which a product creator determines a set of values which satifisfies their wants and then forces it upon users.

Sorry diogenes10 but that is the way business works and it has been this way since pre-history.
Companies have to move on, and sometimes they have to come up with new products to stay with the competition or 'state of the art'.

Otherwise we'll still be driving round in Ford model T's or using DOS 1.0.

I'm not sure what your contract is with this particular software company - but if you don't have any lagal problems about continuing to use the software even though it has been declared 'obsolete' by the original vendor why can't you just carry on using it?

 

[edfair]

Well G.G., since you brought up cars, could we still be driving 57 chevvies.
And finally we have arrived at the annual "whoop de do" of the new models, with new and improved "chrome exhaust extenders" for this model year. An absolutely perfect example of market driven demand. Convince the customer that this year's model is the absolutely best machine ever made. Even though the parts underneath are absolutely the same and the only difference is in the skin, or the skin color.

That is just about the perfect example of the software business, and I suspect that the people making the software decisions are also buying the new cars.

diogenes,
I'm assuming that your company is being forced to upgrade to the "edsel" of operating systems.

Ed Fair
Any advice I give is my best judgement based on my interpretation of the facts you supply. Help increase my knowledge by providing some feedback, good or bad, on any advice I have given.