From: gerald_a_levy (gerald_a_levy@msn.com)
Date: Sun Sep 15 2002 - 08:07:06 EDT
In [76l4] Paul C wrote: > Something analogous to rent is clearly involved. But it generally > does not take the form of rent directly - i.e., a payment per annum > for use of the software. Instead there is a one off cost of purchase > which exceeds the cost of producing that copy of the software.> > What differentiates this from classic rent though, is that unlike land, > software is a product of labour. It is possible, and indeed is conventional > to cost a software development project in terms of person years. Is the convention then to sell the software at a market price which reflects its original development cost (cost of means of production + labor cost in person years x some hourly wage rate) + cost of copying or is a mark-up over costs added onto the amount? > One must therefore differentiate between the value of the information - > in terms of the effort required to write the software, and the > price that each individual copy commands. Yet, isn't software development costs more akin in some ways to R&D expenditures in the sense that it is unclear what the development cost will be ex ante and that the development team may not produce a commodity which is saleable. Wouldn't this be the case even though there is a software development budget and therefore an amount of money allocated ex ante for software development? Or is producing marketable software typically less risky than R&D expenditure and more akin to the production of other commodities? Also when considering the RRI anticipated by software companies, don't we also have to consider the anticipated "life" of the software? In this sense, don't most types of software have a relatively short anticipated useful "life"? If so, this would suggest that software companies in their pricing decisions would attempt to recover their costs within the anticipated "life" of the software. I.e. moral depreciation has to be considered in the pricing decisions. Also, we know that large software developers, rather than simply being presented with technological obsolescence through the actions of hardware companies and rival software makers, *design* (i.e. plan) technological obsolescence themselves. That is, they write new "more advanced" software and then try (through advertising, marketing, etc.) to get consumers to "upgrade" to the new software. This is by no means a practice unique to software companies and is typically done in oligopolistic markets where competition emphasizes product differentiation. Electronic book publishing perhaps is a different matter since e-books might not become obsolescent in the same way that software is and therefore might have a more useful "life" with the consequences that returns on investment might be spread out over a larger number of years. The same might be the case in terms of entertainment company pricing, copying costs, and RRI on music CDs. In these cases, though, except for a select number of writers and musicians, it would be very difficult to estimate demand ex ante for the commodities. In solidarity, Jerry
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