Comments on: Facebook Gifts and The Economy of Abundance http://blog.jamiequint.com/2007/03/26/facebook-gifts-and-the-economy-of-abundance/ Technology, Entrepreneurship, Etc. Thu, 20 Nov 2008 23:57:03 +0000 http://wordpress.org/?v=2.0.3 by: vincevincevince http://blog.jamiequint.com/2007/03/26/facebook-gifts-and-the-economy-of-abundance/#comment-2303 Sat, 28 Apr 2007 10:16:15 +0000 http://blog.jamiequint.com/2007/03/26/facebook-gifts-and-the-economy-of-abundance/#comment-2303 The important point which you seem to have missed here is that these new products with infinite availability and near-zero marginal cost are controlled by one entity - and to deal with that you need to use the equations relating to monopolies and captive markets, not those for classical competitive markets. This should be underlined by your observation that price is maintained even though supply is infinite and cost is zero. This does not fit classical economic theory for a competitive market at all, but is a perfect fit for monopolies and captive markets. A much older example is the Windows OS which we can reasonably assume to have a cost of development and production less than 5% of the net license fees obtained. In this case, just as with your examples, unlimited supply with near-zero incremental cost has no influence upon the price. You might want to focus your consideration on the much more interesting problem of stability semi-captive market in which the penalty for overpricing is a very rapid and normally irreversible loss of captivity in the market place. The important point which you seem to have missed here is that these new products with infinite availability and near-zero marginal cost are controlled by one entity - and to deal with that you need to use the equations relating to monopolies and captive markets, not those for classical competitive markets.

This should be underlined by your observation that price is maintained even though supply is infinite and cost is zero. This does not fit classical economic theory for a competitive market at all, but is a perfect fit for monopolies and captive markets.

A much older example is the Windows OS which we can reasonably assume to have a cost of development and production less than 5% of the net license fees obtained. In this case, just as with your examples, unlimited supply with near-zero incremental cost has no influence upon the price.

You might want to focus your consideration on the much more interesting problem of stability semi-captive market in which the penalty for overpricing is a very rapid and normally irreversible loss of captivity in the market place.

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