Edit: a lot of people seem to be confused about what I'm saying and are telling me how price discrimination is good. I'm not saying it's good or bad. I'm saying it's not a need. Existence proof: many companies that don't do it.

Most of markets segments I can think of (pharmaceutical, automotive, SAAS) do it in one way (direct price discrimination) or another (separate products for a region).

Just about any commodity would qualify. Oil companies aren’t giving discounts to poorer countries or selling them a cheaper inferior product.

Lots of indie software makers can’t be bothered to put in the effort to target individual countries, and just sell at one price worldwide. I believe both Apple’s and Google’s app stores work this way, with no ability to set a different price in different countries.

Google play supports setting different prices by country.

I’m saying, the fact that they don’t proves that it’s not necessary.

These two statements are perfectly compatible with each other.

Again: I’m not arguing for or against price discrimination. I’m just saying it’s not a need.

It's easy to "win" an argument if you just label all information that would make you wrong as "irrelevant", isn't it?

It’s perfectly valid to talk about overall profitability when accounting for non-marginal costs, but that’s not the phrase you use to talk about it, and saying that some units are sold at a loss while others are not is nonsensical in that context.

Yes, and that is the error. The number of copies is not static, and might as well be considered infinite. With digital goods there is effectively no limit on the number of copies which can be produced at near-zero marginal cost, so cost per copy is a meaningless metric. Unlike physical goods where you need to recoup your variable costs for materials, labor, and capital on each item sold before you can even think about offsetting the fixed cost of R&D, every sale of a digital good contributes to the bottom line regardless of the price.

The single most expensive game to develop to date was apparently Star Wars: The Old Republic at $200 million[1]. If each of the 7.7 billion people on the planet had a copy, however, the development cost per copy would only be about $0.026, affordable even for the most limited budgets. Say that 5% of the population would be interested in trying it out at a price of just $0.25 per copy: that's $481M in revenues, or $281M profit. Or they could choose to make it a monthly subscription service at prices attractive to just 1-2 million players and lose money overall while charging subscribers $100 apiece. Same development cost, different distribution models. There is no predetermined cost per copy below which they are selling at a loss and above which they are selling for a profit.

[1] https://en.wikipedia.org/wiki/List_of_most_expensive_video_g...

This isn't pedantry, this is discussing the actual topic of the conversation.

If the answer to your question was "no way" then software would be the one guaranteed way to swim in money.

I'm pretty sure I costed Microsoft money when I was younger and poorer, because I knew how to download most security updates for my pirated Windows without getting caught, so I costed then bandwidth and payed nothing.

Maybe they let that happen or did not work as hard as they could have to prevent it because they figured they'd recover their investment when I grew up and became a paying customer.

The marginal cost on infrastructure is like the marginal cost on bandwidth: really small.

Ah, you could have just said it's a matter of wording. Yes, what I meant is you could sell, and make a loss. So in order to drive up sales hoping that it will actually start a positive feedback loop where the growing community attracts more buyers, you could sell your software at different prices. You probably noticed even some cloud services sell for different prices depending on country (MS gives you some cloud things 20% more expensive in Germany as opposed to US).

And saying the infrastructure is just bandwidth is like saying you just a keyboard to code. Random example, I assume many big name games face similar challenges. [0] I think we can agree maintaining a setup that allows players all over the world to play in good conditions while preventing cheating, and many, many other services costs and involve quite a bit more than just the net link.

[0] https://www.networkworld.com/article/2895129/big-data-and-ba...

Yes, there are lots of other costs for running a network service besides bandwidth. But those are heavily if not completely independent of the number of users. Your anti-cheating effort costs about the same regardless of whether you have a million users or ten million users.

So you can sell the game at a loss meaning once your sales have dried up you haven been able to make a profit or even cover your costs. And you can "sell at a loss in one country" meaning you're willing to let that one country not cover its share of the predicted income (meaning if you sold everywhere like that you'd go bankrupt fast) just because you can get more market share. And some other region will compensate.

I'm sorry you would rather nitpick on the wording instead of the point being made, which I'm sure I explained pretty clearly. And this already exists in practice so obviously the logic behind it is sound.

> But those are heavily if not completely independent of the number of users.

So what if the number of users/sessions hosted increased by 3 orders of magnitude, right? The databases, the game servers, the login servers, the web servers, security, management, and everything else that also has to be geo-located will just balloon to accommodate the extra users or markets at no cost as all IT infrastructure tends to do.

Again, here are some random numbers from almost a decade ago for a game that's probably far less demanding than anything today [0]. Having x US servers vs. having 3x US servers and 5x Asia servers is not quite "independent" of user numbers and location.

[0] http://twvideo01.ubm-us.net/o1/vault/gdceurope2011/slides/Ma...

Some people care about that sort of thing even if it costs them money. For example a bakery might choose to give away their leftover bread at the end of each day, so poor people can eat. This costs them money because some people might choose to get bread for free when they could have bought it at full price.

To take your bakery example, they'd ideally like to charge more for their bread when the customer is rich, but that's not practical, so they're stuck charging the same price regardless. Many businesses work around this, imperfectly, by using coupons or sales.

I think many indy artists are like that, that's why they say they'd rather you pirate their games. They could have used more strict DRM instead, if they only cared about money.

In this situation the bakery is basically running a charity funded by the extra money they're getting through price discrimination. That's separate from their role as a business.

The minimum sustainable price in the absence of price discrimination would not be the "poor people price" or the price paid by the rich, but rather the cost of material, labor, and capital which lies somewhere in between. Price discrimination and the absence of arbitrage allow the bakery to charge rich customers more, but it's entirely their choice to use that extra income to provide goods at a loss to those of lesser means. They could instead just keep the extra revenue for themselves.

Maybe, maybe not. DRM costs money and imperfect DRM can cost future customers, so in the case of an indy developer, it might be a net loss.

It's a bogus argument - any American struggling to afford the high cost of medication in America will tell you that geography is a very poor predictor of affordability. And anybody who has a sizable Steam library can tell you how the summer and winter sales get very expensive, very quickly.

Healthcare should be relatively cheap. Entertainment should be relatively expensive. Prices should be globally stable.

> how is it ethical to price discriminate against Western consumers when it comes to video games, but unethical when it comes to prescription drug costs?

Because you will not die without the hot new video game.

And honestly, although I think charging individuals different drug prices is ethically suspect, I'm ok with charging national health systems (modestly) different prices for drugs. It seems fair to me that relatively rich countries pay more of the R&D costs, because that way we get more drug development in total, which benefits everybody.

That logic applies even more so to entertainment. Whether you set a single global price high or low, you reduce the amount of money available for development costs, meaning fewer and worse games. (And if you set it high, you pointlessly prevent a lot of poorer people from having fun.)

Could you expand on this? If we are looking at pricing discrimination that still allows them to buy it, then they aren't going to die either way. If it is immoral to use their life to make money, then selling it at any more than cost is immoral, and potentially even selling it at cost is immoral since that cost includes some amount of niceties that aren't required to produce the drug. (does the person making the drug really need to earn that much, couldn't they do with a bit less pay?)

Also, given that even if you fully minimize costs and sell the drug exactly at cost, there are still some who can't afford it, so if you want to maximize the number of people who can afford the drug then pricing discrimination is still preferable. If upping the price in one region lets you lower the price in another (remember, we are already selling it exactly at costs), and the people in the first region has more income to spend on drugs, is that not the far more ethical than demanding it be equal costs to everyone even when people in poorer areas end up being denied the drug due to pricing? In effect, the pricing discrimination is a tax on the richer individuals buying the drugs to allow poorer individuals to buy the drug (within the hypothetical where you are selling it at cost).

I guess even deeper then is the question if the person making the drugs should even be profiting off the work. They need to eat and have a place to sleep, but if they require more than the bare minimum salary possible aren't they now increasing the cost to product the drug, resulting people having to pay more to live, just so they can have more money?

Of course, there is the issue that if they can't make enough money to attract them, then they'll pick a different line of work. Is it wrong or immoral for them to do that? To demand a certain level of compensation or they work elsewhere, even though they could survive off of less money while making the drugs at lower cost? If the end worker can demand a premium despite the impact on the lives of those who depend upon the drug, why can't others involved in the production of the drug?

Overall, it makes a nice sound bite, but I don't understand the actual reasoning implied.

However, one can't price gouge on games. There are infinite games to play, many of them free and a great many more are inexpensive. If people don't get a particular game, they will not die or live a terrible life. So game sellers can price as they please and set reasonable terms without any big ethical issues.

Luxury items are already sold using value-based pricing rather than cost-based pricing. If I make $100 and have to pay $10 for a game, that's the same relative value as if I made $1000 and paid $100.

Of course, that doesn't mean you don't feel ripped off if you're paying the higher price. I certainly do when I get charged €60 for a game that in the US costs $60 (which should be €53.54 at current exchange rate).

If a game is too expensive, you move to another game or other cheap entertainment. If a drug is expensive, you pray that there's a cheap generic, which in some cases there isn't.

The idea that prices should be globally stable works in the imaginary world where currency conversions hold real income constant, but that's just not true.

I don't see anything unethical in offering health insurance at a loss (taxpayer funded) only to poor people.

That's not going to work, people are more willing to spend for a higher standard of healthcare than they are a higher standard of entertainment. In fact the dollar value of one additional year of life is virtually unlimited, if not to the state, to the person whose life it is.

To draw on the bakery allegory in another comment, I think we can agree it would b nonsensical for the bakery giving away free leftover bread to homeless people to put controls in place that prohibits them from sharing their bread with others.

But in this case its the exact same product. If I'm a bakery owner and I give fresh out of the oven bread for cheaper/free to homeless folks, and I watch them turn around and sell it to my own customers, well, that freagin sucks.

- Keep giving bread and lose an indeterminate amount of business from my target audience

- Limit the rights of the people who I gave the bread to

- Stop giving bread at all.

If #2 is not possible, then it's either "I take a business hit for trying to provide a service to the less fortunate" or "Fuck the less fortunate".

So now with that said, how I feel about it? Yeah, I think being able to limit the rights of the people I give the bread to is the best of all options. A real world example of this is low income housing, where the recipient isn't allowed to sublet their place, because that would be all sorts of fucked up. Obviously a game key is not anywhere near as big of a deal, but it is a similar principle if we want businesses to be able to open up to as many markets as possible (not just for their own sakes)

Its basically the Airbnb scenario.

Pricing the different regions differently also "leaves money on the table", as there are wealthy people everywhere. Ideally you'd extract the maximum people are willing to pay, regardless of location.