[alexandre_m]

The economics of all of that seem sketchy to me.

It sounds like the main North American market is subsidizing the apps being produced and sold worldwide.

Does the same logic apply for other virtual good such as digital music elsewhere?

[foota]

It's really the opposite, it's a form of price discrimination.

There's a theory of surplus in economics, which is the extra benefit that someone gets from a transaction above what they would have been willing to pay.

If I buy a game that I would have paid $100 for for $50, then I have a "$50" consumer surplus. One the other end, if the producer was willing to let that game sell as low as $40, then they have a producer surplus.

Profit seeking producers want to capture as much as the surplus as they can, and they do this through price discrimination. You see this in product as two things that are essentially the same but with different marketing etc.,

Price discrimination based on geography is quite effective though as well. People with lower incomes aren't as willing to pay high prices for games. Countries can be effectively segmented based on geography (whether virtually or not), and through this producers can charge a higher price to countries with high incomes (taking away the consumer surplus they would have had vs a lower global optimal price), and still get some value out of consumers in lower income countries.

So it's not that NA is subsidizing the market, so much as it is the company trying to squeeze the most of everyone. Now, you could call it subsidizing in that there are probably products that wouldn't be brought to market without the NA market to pay for them, but that's not really "subsidizing".

[cruano]

> People with lower incomes aren't as willing to pay high prices for games.

It's a bit deeper than that, let me share my perspective of purchasing software in a developing country.

Growing up I remember that video games only picked up in popularity when you could "buy" pirated games. For reference, I'm talking about the Nintendo Wii era and those were about 1-3 USD each for a CD with the pirated version of the game. Also for reference, right now a Nintendo Switch game (that costs $60 MSRP in the US) sells for about $90 due to taxes and stuff [1].

To me, there's two significant issues with that: 1. People don't feel like they are stealing when buying pirated goods. They are spending their hard-earned cash into something they want/like, and that's as far as their reasoning goes. This happens for other software like Photoshop too, and even physical goods. I remember buying fake yu-gi-oh cards knowing they were fake, but that's the only ones that were available and that I could afford. I had a few legit ones and I treated them as a treasure, in the same way you treat your fancier clothes better than your normal ones. 2. You can have a full meal in a diner for about $3 in my country, desert and all. If you want to sell food, that's how low you have to go because that's what people can afford. A $10 dollar meal is normal in the US, but here it would be a luxury.

Now, that combination is very problematic as you can expect. People do want to pay for stuff, and to their minds that's what they are doing. To me, selling pirated goods is as scummy as it gets, but I cannot blame someone for buying it when it's their only choice.

So for most companies, having "regional" prices on this markets is the difference between selling or not.

[1] Not exagerating at all, google `700 GTQ to USD` and then this https://www.max.com.gt/juego-nintendo-switch-pokemon-violet-...

[matheusmoreira]

> People don't feel like they are stealing

Yes. That's because they aren't stealing. It's completely normal to feel like you're not stealing when you're not stealing.

The copyright monopolists would very much prefer that you felt bad when you "steal" their imaginary property but the truth is nobody other than the politicians they lobby cares about their opinion on anything.

[matheusmoreira]

Excellent. So how do we figure out which regions have the lowest prices so we can pretend to be in that region? Because I sure as hell don't want to pay high prices while some other guy is paying peanuts.

Any attempt at price discrimination should immediately result in arbitrage.

[not_a_shill]

>Now, you could call it subsidizing in that there are probably products that wouldn't be brought to market without the NA market to pay for them, but that's not really "subsidizing".

That's every product ever made for profit by a developer in a 1st world country. It's still essentially subsidizing even if you don't like the optics of the word.

[TeMPOraL]

Depending on the specifics of the business model (e.g. is the marginal good sold paying primarily for the up-front investment, or for the per-item costs), you can sometimes call it "NA subsidizing everyone else", or in other cases "vendor overcharging NA customers because they're wealthier on average", or in yet other cases, "selling at the local market rate".

[foota]

It's not subsidizing though.

It would be subsidizing if the effect were that Americans pay more so that people in other countries pay less.

But the alternative to Americans paying more isn't the other people having to pay more, the alternative is the product not existing. (or, alternatively, the company making less profit).

There might be some cases where if the US market didn't exist, the price in another country would go up, but it would happen because a company wasn't able to sustain a lower price with the reduced quantity, and would therefore have to settle for selling less quantity at a higher price.

[mr_toad]

Subsidising would imply that they’re selling in other markets for a loss. They’re not, there’s no subsidy.

[greiskul]

From popular internet knowledge, games are more expensive in Australia then NA (Including digital distribution). Would you say that Australia is subsidizing games for Americans?

[ipaddr]

If there were more Australians or if part of the money didn't go into government taxes

[simonh]

It is in the interests of North American consumers for the company to maximise it's revenue from other regions to help fund product development. Higher price points in developing countries would make the product largely unaffordable there, reducing revenue.

[slg]

It isn't really subsidizing because the goods are virtual which means the marginal costs are minimal. There of course could be infrastructure costs to get up and running in a new country. However once that is done, almost all the marginal revenue developers get out of these additional markets is profit because there is practically no cost to selling an extra copy even if it is at an extremely steep discount.

[parker_mountain]

> the main North American market is subsidizing the apps being produced and sold worldwide

I think you'll find that this has been the practice for many decades. A stark example is medicine pricing.

[zinekeller]

It's not really. The US medical system has this tendency to inflate pricing in a cat-and-mouse system where drug companies and insurance companies try to duke out what is the "correct" price of a drug. Setting it too high and the insurers won't cover it, too low and the pharmaceutical companies are "losing" profits to insurers. It's a terrible feedback loop that hampers those who can't afford insurance because the premiums are too high because pharmaceutical companies know that in most cases insurers will pay.

[willnonya]

I think youre missing several inputs into your feedback loop. The original statement about the US system bearing the brunt of development stands. It's also true that insurers influence the market. Both are true. There are also government inputs into the market, political inputs a d supply chain elements that all feed into this. The one stakeholder will little real input in the end consumer who gets stuck paying whatever the others have decided they'll allow...

[kevin_thibedeau]

That doesn't explain the behavior of off-patent drugs being jacked up in price on a whim or near identical variants being made to extend patent protection and maintain the predatory pricing of the name brand. Their development costs are already recouped during the initial patent phase. Tweaking things a little doesn't cost them nearly as much.

[dantheman]

Yeah that's caused by the fda

[jonasdegendt]

Entire reseller websites (e.g. g2a) of games and software alike have popped up trying to profit from this arbitrage opportunity. You buy games in Russia and an American scoops up the license key for a little more, it’s all automated too nowadays.

On the same note, why are Levi’s jeans $100 bucks in Europe, but $40 in the USA? They’re probably coming out of the same Asian factory. Not an economist but different value propositions I guess.

[ipaddr]

EU and the USA doesn't have free trade in the pants category

[jonasdegendt]

Neither does Vietnam (one of the places Levi’s are produced nowadays) and the US, the pants are imported and duties are levied regardless of whether the pants are sold in Europe or the US.

I’m sure sales tax is less in pretty much every US state compared to European countries, but it still doesn’t explain a $60 difference in price. It’s largely different price points based on different locales in accordance with what consumers are willing to shell out for the product.

[teawrecks]

Something else to consider is motivating piracy. If they sell a piece of software for a flat price in all geos, the ones who can't afford it will invest more time in pirating the software. As a side effect, piracy is normalized in those communities as a necessary way of life in the digital world. Naturally, their tools and methods will leak out to other communities and make piracy easier in places that CAN afford them. Devs would rather sell to those communities at a "loss" than ostracize them and deal with the fallout.

Check out this brief description of how software proliferated in Poland during the early years of computers (3:09-8:27): https://youtu.be/ffngZOB1U2A

[kaba0]

Well, the economy of that is sketchy in that multinational corporations pay sometimes an order of magnitude less for the exact same job simply due to you living in a different country.

[MonkeyMalarky]

I think it applied to DVDs in the past and was impetus behind region locking media. Also another way to look at it is less subsidizing and more maximizing profit by not leaving money on the table in foreign countries.

[pvarangot]

It could also be said that the cost of compliance and the cost coming from the litigiousness of American consumers shouldn't be subsidized by countries where selling an app is monumentally easiest and cheaper.

[Mistletoe]

It applies to video games and software for sure. I think this is why it is almost always cheaper to buy a code online for something like a Microsoft product.

[charcircuit]

>It sounds like the main North American market is subsidizing the apps being produced and sold worldwide.

Yep. Even ad supported apps are subsidized by NA users.