David Pogue does not call it demand elasticity but that is what he’s talking about when he explains why Apple is selling it’s new OS upgrade for $29 rather than the usual $130:
The App Store Effect says this: if you cut a software program’s price in half, you sell far more than twice as many copies.
If he had only said something like this ten weeks ago, I would have had a great example for class!
Cheap Talk 
2 comments
Comments feed for this article
June 11, 2009 at 6:26 pm
Shahid
He does, weirdly, assume that price elasticity on the app store is greater than one, and that it’s somewhat linear. Interesting ideas, but I’d *love* to see some data on this. I’m sure it’s out there somewhere!
June 11, 2009 at 7:18 pm
hern
this brings up an interesting situation…
won’t initial demand eventually shift as a result of this expectation (or being aware of this expectation?) in other words, if consumers expect prices to drop by half (or as seen in the app store often by much more than half), they’ll eventually just wait until prices drop further.
but looking at the OS upgrade, maybe apple figured out $130–>$29 would be the profit-maximizing point?