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Nornagest comments on Open thread, Jan. 26 - Feb. 1, 2015 - Less Wrong Discussion
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Sublinear pricing.
Many products are being sold that have substantial total production costs but very small marginal production costs, e.g. virtually all forms of digital entertainment, software, books (especially digital ones) etc.
Sellers of these products could set the product price such that the price for the (n+1)th instance of the product sold is cheaper than the price for the (n)th instance of the product sold.
They could choose a convergent series such that the total gains converge as the number of products sold grows large (e.g. price for nth item = exp(-n) + marginal costs )
They could choose a divergent series such that the total gains diverge (sublinearly) as the number of products sold grows large (e.g. price for nth item = 1/n + marginal costs )
Certainly, this reduces the total gains, but any seller who does it would outcompete sellers who don't. And yet, it doesn't seem to exist.
True, many sellers do reduce prices after a certain amount of time has passed, and the product is no longer as new or as popular as it once was, but that is a function of time passed, not of items sold.
I think you could probably model Kickstarter as a sneaky version of this.
Kickstarter is an excellent example of how to monetize affective biases :-D
Kickstarter implements dominant assurance contracts, e.g. it solves a coordination problem and takes a cut for doing so. It's an example of doing well by doing good.
Kickstarter is really sneaky, because I tend to assume (and I assume everyone assumes) that the preorders will get a better price than the postorders. But the only time I used kickstarter final cost was lower than what I paid. I don't know if that it is typical. Probably one should charge more to preorders for price discrimination reasons: they are the principle fans. But that is a different reason.