Blame it on the binding constraint.

Let me explain.  Has it ever struck you how peculiar it is that the price of so much writing these days is zero?  No, I don’t mean that it is suprising that blogs don’t charge a price.  There is so much supply that competition drives the price down to zero.

What I mean is, why are so many blogs priced at exactly zero.  It would be a complete fluke for the optimal price of all of the blogs in the world to be at exactly the same number, zero.

And indeed the optimal price is not zero, in fact the optimal price is negative. Bloggers have such a strong incentive to have their writings read that they would really like to pay their readers.  But for various reasons they can’t and so the best they can do is set the price as low as possible.  That is, as it often happens, the explanation for the unlikely bunching of prices at the same point is that we are all banging up against a binding constraint.

(Why can’t we set negative prices?  First of all, we cannot verify that you actually read the article.  Instead we would have people clicking on links, pretending to read, and collecting money.  And even if we could verify that you read the article, most bloggers wouldn’t want to pay just anybody to read.  A blogger is usually interested in a certain type of audience.  A non-negative price helps to screen for readers who are really interested in the blog, usually a signal that the reader is the type that the blogger is after.)

Now, typically when incentives are blunted by a binding constraint, they find expression via other means, distortionary means.  And a binding price of zero is no different.  Since a blogger cannot lower his price to attract more readers, he looks for another instrument, in this case the quality of the writing.

Absent any constraint, the optimum would be normal-quality writing, negative price. (“Normal quality” of course is blogger-specific.)  When the constraint prevents price from going negative, the response is to rely more heavily on the quality variable to attract more readers.  Thus quality is increased above its unconstrained optimal point.

So, the next time you are about to complain that the blogs you read are too interesting (at the margin), remember this, grin and bear it.

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