Subject: Re: [FYI] Microsoft license spurns open source
From: "Stephen J. Turnbull" <>
Date: Mon, 25 Jun 2001 23:34:08 +0900

>>>>> "shap" == Jonathan S Shapiro <> writes:

    shap> This line of reasoning [that restrictive licenses lead to
    shap> lower prices] is in general only correct for tangible goods.
    shap> For software, it is only correct in special cases.

Not at all.  The point of such _versioning_ (the term of Shapiro and
Varian) is to allow the vendor to sell at low prices to some customers
without lowering price to others.  This is perfectly general, and in
fact applies most directly to software and other information goods,
where it is very easy to create versions with identical cost to the
vendor but radically different values to different types of customer.

Compared to the non-discriminating vendor (who charges the same price
to all customers), we can be fairly sure that the discriminating
vendor will raise prices in some segments, and lower prices in others.
It is easy to cook up toy examples where average price over all
customers rises, equally easy to cook up cases where it falls.

    shap> All of these special cases lead to higher rather than
    shap> lower prices. The motivating economics behind
    shap> license-derived pricing reductions relies on the creation of
    shap> collateral scarcity in some market, and in software the only
    shap> scarcity is artificial. Therefore, terms restricting use
    shap> should not lead to lower costs for such products.

You're confusing cost and price, I think.  Costs (to the vendor)
surely don't change much; prices (to the customer) may go up or down.
Which do you mean?

By the way, such versioning unambiguously increases the social surplus
derived from the market by increasing the volume of sales.  It seems
likely that it also transfers surplus from the demand side to the
supply side, but even that is going to be false for certain extreme
(but not perverse) specifications of demand.

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