The virtue of price discrimination

I recall Bauch &#38; Lomb (sp?) doing something like this with contact lenses: three prices were offered for three different packagings ... and the general public was outraged when it was discovered the content of those packages were exactly the same. Dell got beat up for something similar, offering different prices depending on how you navigated thru the website to a given product's page.<p>Price discrimination has its place, and if not handled with care those paying more because it's worth more to them will resent the treatment.

These are two different things. Pricing in Farmville is incremental pricing, where you get incrementally more for more $. Price discrimination is charging different people different amounts, like charging people to read an article on their Kindle that they can read for free through their browser, etc. That being said, much, much, MUCH more complicating pricing is possible thanks to the Internet, and companies are just starting to explore the possibilities. A really good example (that is positive for end users) is how Steam does deep discounts and bundles all the time. As a user you grow to expect these price fluctuations for games, but most industries haven't been so affected yet.

It angers me to see this same logic applied to video games. From a business perspective it might make sense, but playing a video game that functions this way (like FarmVille et al), leaves a sour taste in my mouth.<p>I've tried a few of them, universally dislike the idea, and have yet to pay for any.<p>If a game offers IAP, I look to see if it's some sort of virtual currency. If it is, the developers go on my shitlist and I try to never give them my business again.<p>I've seen developers publish awesome fun games with little to no DLC, and it saddens me when I see their next release to turn out to be a farmville-ish rehash.

Back in the day, we sometimes called this "shareware". The first episode of Commander Keen was free, but episodes two and three cost money. :)<p>Or we called it a free trial, or a demo. We included a disc with a crippled version of the game in a video card box, or we glued it to the cover of a gaming magazine. Or we called the extra parts expansion packs. Or sequels. Or DLC. Or, yes, we sell them for real currency in an in-game item store as with Farmville (or League of Legends, World of Tanks, Gunbound, etc.)<p>All of it boils down to the same thing: Some people pay nothing and consume some amount of free content. Other people pay $X and get some higher amount of content, even while other people pay a higher $Y and get even more content. And still others will pay less, and get the same content, because they waited for a Steam sale.<p>And so it goes. Pick any six gamers at random who own Portal, and they all probably paid different amounts for it: Some bought it as part of the Orange Box, some individually, some got it for free, some bought it in a store, some got it for free when they bought Portal 2, some bought it on sale, some bought it after the price was cut, some bought it in the US, some bought it in various other countries, some bought it using USD, some bought it using a different currency. There's probably 500 different prices you <i>could</i> have paid for Portal. (Actually a lot more, once you include exchange rate fluctuations for people buying Steam games in USD using a non-USD currency.)<p>And you know what? Meh. There's not a lot new under the sun. (Especially when it comes to ways of relieving punters from their cash.)

Things like this invariable involve artificially crippling a product in order to create a market segmentation that does not naturally exist. I have a hard time coming to terms with the virtue of this model.

Incidentally, better price discrimination transfers some of the surplus generated by economic exchange from the consumer to the producer. Depending on the situation, this may or may not be a societal good.

It would serve the OP well to gain an understanding of the difference between first-, second-, and third-degree price discrimination. <a href="http://en.wikipedia.org/wiki/Price_discrimination#Types_of_price_discrimination" rel="nofollow">http://en.wikipedia.org/wiki/Price_discrimination#Types_of_p...</a>

I can't help but think of this as preying on the weak. Who pays 1000's per month? Somebody with a broken sense of value. This is not a business model I want to participate in at any level.