michael@stb.UUCP (Michael) (07/17/87)
In article <516@myrias.UUCP> cg@myrias.UUCP (Chris Gray) writes: >Just finished reading Mike (My watch has windows) Meyer's long posting >... > approximate number of machines - 150,000 > approximate percentage of owners that could be expected to > buy a given game - 1% (probably over generous) > approximate sales of game - 1500 > > approximate cost of producing the game - $50,000 (probably low) > > therefore, required PROFIT per game - $50,000 / 1500 = $33.33 > > therefore, reasonable cost per game - $50.00 Congradulations! You have just fallen into the classic mistake of economics: prices should and in a perfectly competitive market will be at the value of the goods to the consumer, not at the value of developing to the producer. In english: A product should be priced at the value to the user. How much it cost to make is a SUNK cost. You cannot, and will not get it back. You dont care about it once the project is done; you have a product that you want to sell, and the only question is: At what price will you sell the most? The equations are not identical; generally, you want price * sales to be maximized. Actually playing with the equations yeilds that monopolized markets are not the same because the price charged will affect demand. In a perfectly compeditive market, if your price is high, people will go elsewhere, so you sell all you want up to a point. The real market is 1/2 and 1/2; rasing prices will lower demand because people can get entertainment software elsewhere, but they cannot get quite the same entertainment software. So, for general E.S. the lower prices are better; for specific items higher prices will yeild better profits, but UNDER NO CIRCUMSTANCE IS THE BEST PRICE DETERMINED BY DEVELOPMENT COSTS. If you cannot recover your development, then you either over developed, or under developed. If this continues over a long period of time, you need to change markets; yours is saturated. -- : Michael Gersten seismo!scgvaxd!stb!michael : Copy protection? Just say Pirate! (if its worth pirating)