Subject: Re: street performer protocol
From: Ian Lance Taylor <>
Date: 12 May 2000 10:02:22 -0700

   From: Russell Nelson <>
   Date: Tue,  9 May 2000 13:40:47 -0400 (EDT)

   The mandate of a science is to understand and explain how the world
   works.  That's why I keep suggesting that the principals of free
   software businesses put some effort into understanding the science of
   economics.  If you don't understand price theory, how can you
   rationally set prices?

The best theory I've heard about setting prices is the choke model.
Speak slowly.  Say ``The price is $100,000.''  If they don't choke,
add ``per year.''  If they still don't choke, add ``plus support and
training costs.''

Adjust the initial price based on the office furnishings, as well as
office location and size.

The main risk is putting the customer into a severe state of shock and
mistaking that for placid acceptance.

Of course this only works for a direct sales model.  But it's well
suited for selling free software.

More seriously, the main mental block I've had in pricing is the
temptation to set prices based on costs.  Especially when you're
selling free software, you should price based on value to the
customer.  It's not wrong to charge $100,000 for something which it
will cost you $5000 to deliver.  The customer gets value for money.
You get money to invest in improving the product.