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passive_fist 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.
A psychological effect could be at play. If you pay $10 for a product and this causes the next person to pay $9 for it, it's an incentive against being the first to buy it. You would wait until others have bought it before buying. Or you might think the product is being priced unfairly and refuse to buy at all.
It seems that to counter this, you'd need another psychological effect to compensate. Like, for instance, offering the first set of buyers 'freebies' that actually have zero or near-zero cost (like 'the first 1000 people get to enter a prize-giving draw!')
Reminds me of kickstarter.