[reaperducer]

So you increase the price of your app by 30 to make up for Apple's cut%. It's called business. It happens all the time in every single industry.

If a business' property taxes go up, that cost is passed on to its customers. Why do people think that because something is on a phone that it should be any different?

[twicetwice]

That's also not allowed. I think Hey would be fine charging $142 a year for a subscription in their app, with a little note below saying "you can get this for $99 on our website, the difference is Apple's cut." In fact, if I understand it correctly, the price in-app has to be the same as the price anywhere else. They're literally not allowed to do what you're suggesting and pass the cost of Apple's fee on to consumers.

[reaperducer]

You just Charge everyone the same and don't tell the customers that they're paying Apple's cut.

Just like Hey doesn't tell its customers what percentage of its fee goes to the water company, or the electric company, or to company travel.

This is how business works.

[twicetwice]

So Hey should boost their prices everywhere, even on their own site, to $142, so that they can make up Apple's cut? Which is what Apple demands. I don't think that's reasonable.

I think that you and I are broadly in agreement. If Hey were allowed to charge $142 in their iPhone app, and $99 on their website, I'd think that was much less ridiculous than the situation as it stands today.

[acituan]

> It's called business. It happens all the time in every single industry

And we call those situations market failures. Besides, in this case the market failure is due to a monopolistic mechanism, which doesn't happen "all the time in every industry". If we are going to do markets, let's do it properly.

Increasing price %30 causes a corresponding decrease in the demand, and in aggregate this can cause a decrease in the total profit. The fact that the developer is forced to set a new price point this way is a source of inefficiency for the entire app economy.

Besides forced price increase is not the only harm done by the monopoly of the App Store. As this website exemplifies, it has monopoly over ontological decisions (whether a certain type of app can exist or not), over design decisions (signups, in app purchases etc) and whatnot. These are further points of inefficiency or outright failure. Apple might or might not be doing a good enough job making the best out of these decisions, but the bottom line is we don't have a choice of another player emerging with potentially better choice-making and therefore a better app store.

[pdonis]

> we call those situations market failures.

To the extent that this situation is a "market failure", it's not one that's fixable except by users changing their preferences.

> in this case the market failure is due to a monopolistic mechanism

Apple only has a "monopoly" on their own app store because they built it. Users are not being forced to use iPhones; they choose to because they believe iPhones give them better value overall than the alternatives. That's called free market competition, not monopoly.

[acituan]

> it's not one that's fixable except by users changing their preferences.

By definition market failures can't be fixed by market dynamics. That is why state does tons of interventions/regulations to make it work.

> That's called free market competition, not monopoly.

No. Vertical integration means there is no free market at the integration point to begin with, which integration of a software application store with a physical phone is. We are talking about a $50bil/year market that is not free.

[pdonis]

> By definition market failures can't be fixed by market dynamics.

That's why I put "market failure" in quotes. If you think anything fixable by users changing their preferences isn't a "market failure" by your definition, fine, then the Apple situation is not a market failure by your definition.

> That is why state does tons of interventions/regulations to make it work.

No, the government does tons of interventions/regulations to favor particular market players, under the guise of "fixing market failures". In almost all cases, these interventions/regulations actually make things worse overall, but of course they make things better for the particular market players that were favored.

> Vertical integration means there is no free market at the integration point to begin with

Throwing around buzzwords proves nothing. Apple created the iPhone and its app store. It can do whatever it wants with them because it owns them. It has the market share it has because users have freely chosen to use its products instead of those of its competitors. That's the essence of a free market. The fact that you don't like doesn't make it not a free market.

[acituan]

> Throwing around buzzwords proves nothing

These are technical terms, not buzzwords and calling them so doesn't make much of a counter-argument.

> That's the essence of a free market

No it is not. You seem to equate free market with unregulated market which is not always true. Markets fail to self-regulate in the absence of open competition, which is what precisely the App Store on iPhone is. Nearly half of the mobile phone apps in the US comes from a closed market. Imagine instead Apple owned half of the roads in the US and stipulated what businesses could use those roads, e.g. only certain grocery store's trucks can deliver goods over them. That would be far from a free market too.

[pdonis]

> These are technical terms, not buzzwords

The technical definitions of these terms don't support the claims you are making using them, so you're not using them as technical terms, you're using them as buzzwords.

> You seem to equate free market with unregulated market

Not at all. A free market is regulated by the voluntary choices of market participants.

> Markets fail to self-regulate in the absence of open competition

So your definition of "open competition" is "Apple can't choose the terms on which it is going to provide products and services that it built itself". By that definition, "open competition" has nothing whatever to do with "free market", since in a free market every market participant gets to choose the terms on which it is going to provide goods and services that it built itself. Forcing market participants to provide goods and services on terms they would not choose for themselves is not a free market.

> Imagine instead Apple owned half of the roads in the US and stipulated what businesses could use those roads

Roads are not the same as smartphones or apps; roads are exclusive in a way that smartphones and apps are not.