Quote:
Originally Posted by HarryT
Some people, Steve, appear to hold the rather odd view that a lost sale is not "depriving the author of money", since the author never had that money in the first place. The logic of this rather escapes me, but this is an argument that one not infrequently encounters.
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Here's the logic:
If we look at a classic supply/demand curve, we can see that as the price goes down, demand goes up. That is, the less something costs, the more people will be willing to buy it. If you price a sandwich at $5, more people will buy it than if you price it at $10. Let's say 20 people are willing to buy it at $5, but only 10 people at $10. If you raise the price to $15, then only one person is willing to buy it. Above that, no one will pay for the sandwich.
Now, if you lower the price to $0, how many people will buy the sandwich? Theoretically, an infinite number. In reality, let's say there are only 100 hungry people nearby. They'll all want one! So, if someone is giving away sandwiches, how many sales have they lost? 100 free sandwiches doesn't equal 100 lost sales of sandwiches. It turns out that 80 of those people didn't want a sandwich for $5. So you've only lost 20 sales if you were going to price your sandwich at $5.
Now, granted, you've lost 20 sales, and 100% of your potential profit. But looking at each person lining up for a free sandwich and equating them with someone who would have paid you some arbitrary amount is ludicrous. We wouldn't have any sympathy for a sandwich maker who was unhappy because he sold all his sandwiches for $5 - if only he'd have charged $1000 each, he says, he would be a rich man.