From: Josef Moellers <mollers.pad@sni.de>
Subject: Re: Most Wanted Cracks List
Date: Wed, 29 Jul 1992 13:31:10 GMT
Organization: Siemens Nixdorf Info.Sys. AG, Paderborn, Germany

In <4eQ0Nvi00WCTM8wm08@andrew.cmu.edu> ri09+@andrew.cmu.edu (Robert W. Igo) writes:

[ First part deleted ]

>So, if I am a bean-counter working for a software company, and I'm told
>"We want to make $10,000 this year on this game.  How much should we
>charge?"  Well, if the bean-counter concluded that absolutely everyone
>would buy the game, he'd tell them to charge 1 cent over their cost to
>make and ship it.  Obviously, this won't happen.  However, if he
>concludes that 100% of the software-buying market for games will buy it,
>he could charge a little more than production and shipping costs.  This
>is also something that wouldn't happen.  Finally, he calculates the
>number of people who will actually purchase the item, figures in how
>many of them will pirate it to others, considers the full effect on the
>total group of people who buy games, then subtracts the small percentage
>of people who will actually buy a copy after having a pirated copy. 
>Assuming he has the right number of people who will actually buy it,
>he'd figure out what the company should charge.

>I'm by far no economist, and I realize that I've glossed over a few
>details (like that fact that there will be less people buying the game
>at certain prices and more at others, but I'm assuming my bean-counter
>example would know to do that.)  No flames, please.

Commercial companies are striving to maximize revenues.
They are faced with two extremes:
l) Make it very cheap, (virtually) everyone will buy it, but they will
   make next to no money,
h) Make it bloody expensive, nobody will by it, they'll make no money
   either.
So their price has to be somewhere in between.

Let's take a ridiculous simple example:
A company makes something which costs $50 to produce and ship.
They have found that if they sell it for $50, then they could sell 1000
items, if they sell it for $100, they'd sell none (someone else sells an
exact counterpart for $99.99 B-{) In between,  they estimated, there
will be a linear dependency of price and number of sales.

- Starting at the lowest price, 1000 people buy it. Net gain is $0.
- Ask $60, now 800 people will buy it. Net gain is 800 * ($60 - $50) = $8000.
- Ask $70, now 600 poeple will buy it. Net gain is 600 * ($70 - $50) = $12000.
- Ask $80, now 400 people will buy it. Net gain is 400 * ($80 - $50) = $12000.
- Ask $90, now 200 people will buy it. Net gain is 200 * ($90 - $50) = $8000.
- Ask $100, now nobody will buy it. Net gain is $0.
For this simple example, the maximum gain is at a price of $75, with 500
sales and a net gain of 500 * ($75 - $25) = $12500.

So, in order to fix the price, they'll have to do merket research to
find out how many items they'll sell at what price and then find the
point where they'll have a maximum.

With software companies this is exactly the same: how many people will
buy our product at what price, how many pirated copies will float around?

That's how I learnt how they play the game (pun intended)!

>Hey, perhaps I'm totally wrong! :)

Judge for yourself B-{)

Josef
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