Martin Langeveld has this excellent post on the Nieman J-Lab site that summarizes some work done by Albert Sun, a UPenn math and economics student, Mouths of Babes Class of 2010. Sun tackles a topic that’s received little treatment: price discrimination in charging for content. I’ve been wondering when someone would do this. And as Langeveld points out, a lot of the things we are talking about these days can be explained by the trusty Samuelson text and our Micro 101 notes (e.g. the nature of a “public good,” the inherent instability of cartels, etc.)
And I get Sun’s arguments, for the most part. But here’s what’s nagging me: perhaps the central lesson of any basic microeconomics text is that in order to maximize profit, the firm prices to marginal cost. And in a world of free, perfect copies, isn’t the marginal cost of nearly all web content……zero?