On 8/4/98, Albert Henderson <noblestation[_at_]compuserve.com> wrote:
>
> On Fri, 31 Jul 1998, Dan L. Burk <burkdanl[_at_]shu.edu> wrote
> >
> > If (I say *if*) the market is functioning properly, manufacturers,
> > landlords, lawyers, and the rest should be naturally pushed by
> > competitive pressure to lower their prices to marginal cost. But
> > that's because they deal in congestible goods and services.
> > Intangible goods are different because we have intervened in the
> > first place -- by creating copyrights, patents, and so on -- to
> > artificially inflate the price above marginal cost. If we're going
> > to do that, we shouldn't do it any more than we have to -- and we
> > generally don't have to past the point necessary to induce creation
> > of the work.
>
> This half right, assuming there is no intangible value to "location"
> of real estate, to the "reputation" of a manufacturer or lawyer,
> or a perception of "scarcity," of goods and services offered for
> sale.
Your examples are interesting, but inapposite. Location is of course congestible -- you can't have an infinite number of real estate parcels in the same location (or even two). Perceptions and reputations are generally delivered at marginal cost; investments in reputational capital are almost always recaptured in pricing congestible goods and services.
> The reason landlords, manufacturers, and lawyers are richer than
> most publishers
This is a generalization, which, I submit, is totally without foundation.
> is they have intangibles that cannot be so easily undermined by
> photocopies and computers.
I am at a bit of a loss to respond to this, since it seems to me so loaded with unprovable or incorrect assumptions, that I hardly know where to begin. I shall confine myself to observing that to the extent photocopiers and computers "undermine" the price for creative works, they are simply lowering the marginal cost of distribution, as I observed above.
(I also question your implication that publishers do not invest in the same "intangibles," such as reputational capital, that all the other businesses listed invest in. But that is for another thread.)
> The concept of "perceived value" applied to pricing is will
> documented particular in the computer industry where early adopters
> will pay unreasonable sums to be first with the most buggy gizmo.
This is simply a form of price discrimination, which, as I pointed out to Mr. Scarpitti, publishers practice by first releasing high-priced hardbacked editions, then releasing mid-priced trade paperback versions, and finally
I'm also not at all clear as to how it is responsive to my comment above.
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