Hi everyone, I have one thing to add to the "Joel article" conversation. Normally I wouldn't worry about it, but I thought some people might be interested in learning why Joel's theory isn't quite right. It's solid, but it's missing a pretty big screw.
"All else being equal, demand for a product increases when the prices of its complements decrease," says Joel. Unfortunately, Joel forgets about two important assumptions of economic theory. When the price of a good drops, there are two things that can happen: 1. You have more money left in your pocket, so you buy more of that good. 2. You have more money left in your pocket, so you go buy something else. These are known as the substitution and income effects. In the substitution effect, you substitute something else for the good that is now more expensive; i.e., if flights to Miami increase in price, you go to New York instead, but if flights to Miami decrease in price, you go to Miami more often. Thus, Joel's argument that reduced Miami flight prices yield MORE flights to Miami and thus higher demand for hotel rooms. (I've simplified the definitions a bit, BTW, but this is the gist of it.) The income effect is the exact opposite. If flights to Miami decrease in price, you buy the exact same number of flights, but now you have more money left over. Your income level has effectively risen. In this case, reduced Miami flight prices have no effect whatsoever on demand for hotel rooms, because (a) nobody wants any more flights to Miami than they currently have or (b) they'd rather have the extra cash for something else. These two effects interact in different ways depending on the people and goods involved. For example, the substitution effect is pretty common in grocery purchasing (if filet mignon is the same price as Alpo, you buy the filet) but at a certain point the income effect kicks in (you can only eat so much, and you simply won't buy more than 30 lbs. of filet mignon per week). It sounds pretty basic, but it's what Joel missed. He assumes that buyers of open source software are subject to the substitution effect. But if the income effect prevails, the expansion of open source will have no effect on its complements. As far as d20 gaming goes... I'm not going to go there. It's a different discussion. But Joel's argument is flawed, and his conclusions, though probable, aren't fully supported by the microeconomics he lays claim to. All else being equal, demand for a product MAY NOT INCREASE when the prices of its complements decrease. -- Joseph Goodman Goodman Games [EMAIL PROTECTED] www.goodman-games.com _______________________________________________ Ogf-l mailing list [EMAIL PROTECTED] http://mail.opengamingfoundation.org/mailman/listinfo/ogf-l
