Aug

28

Elasticity City

August 28, 2009 | Comments Off | Joshua Gans

[HT: Nieman] Here is some data for the iPhone app, WriteRoom:

  • 08/20/2009 9 @ $4.99
  • 08/21/2009 4280 @ Free
  • 08/22/2009 7166 @ Free
  • 08/23/2009 4901 @ Free
  • 08/24/2009 88 @ $0.99
  • 08/25/2009 56 @ $0.99
  • 08/26/2009 119 @ $0.99

Based on the positive priced data, that is a price elasticity of -4/7. It suggests (based on a marginal cost of around 1 cent) that the optimal price is $0.04. Damm it, the iTunes App Stores minimum positive price is $0.99. Is that policy holding back micropayments?


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