Saturday, July 18, 2009

New Book: Can Profitable Companies Give Products Away for "Free"?

In Free: The Future of a Radical Price, reviewed in the July 16 issue of the Economist, Wired editor and former Economist writer Chris Anderson probes whether technology and productivity gains have made it possible for goods and services to now be free.

It's an interesting question, especially in light of modern technological advances. For example, one might reasonably wonder why Amazon doesn't simply give away its Kindle or Kindle DX, earning its money through sales of downloadable content.

Similar questions arise in a competitive context. The standard competitive economic model predicts that in the market equilibrium the price of a good will equal the marginal cost of the last unit produced and sold. Yet for goods such as software that has already been written, and is also available for download online, the marginal opportunity cost to the firm of making one more download available is awfully close to zero (especially if server space and bandwidth are sunk costs). Which implies that the market price should also be near zero.

Read the Economist's full review of Chris Anderson's Free. And best of all, you may read Free -- the entire book -- absolutely free (below). Enjoy!

FREE (full book) by Chris Anderson

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