Friday, December 4, 2009

A Very Loose Case of 1st Degree Price Discrimination

I have always been very interested in the ways in which firms try to determine market demand curves. When we study economics we use simplified models such as supply-demand graphs to determine market price and quantity. We all know that in the real world its not that simple. I recently stumbled upon a method to determine individual demand curves, its used by a company that developed an iPhone game titled EliminatePro. I believe that this game uses a loose form of 1st Degree Price Discrimination. A precise definition of it is located here for those of you who don't know what it is. You can assume that the game developer possesses the characteristics of a monopolist mainly because its only accessible on the iPhone which is only accessible by having AT&T. The game is free to download put when you play you only have a limited amount of "energy" which is a function of how long you play and how many kills you get. Once your energy has drained then you must pay for more, you can also purchase more equipment (e.g guns and armor). As you can see gameplay as a function of time is determined by the individuals value with those who place a higher value playing longer and having better equipment. You are not necessarily getting a better experience but getting more of it immediately, you are essentially paying not to wait. Its interesting to see what kind of reviews this game has because of its pricing model, from what I have seen its largely negative (i.e those who do not place a high value on it).

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