Feb 082006

I keep thinking about the DRM "enhanced" media files out there. They’re cute. There are a number of factors in quantity exchanged of a product. Factors that affect demand are:
– The product’s price
– Tastes
– Expectations about the future
– The price of other products (complementary or subtitute goods)
– whether the product is an inferior good(say, cheap ice cream) or a normal good (say, good ice cream) or even a luxury good (say, excellent boutique ice cream).

Those wondering why Betamax (which is clearly superior) was beaten out by VHS. Simply look at the factors. When it was the only major player in the market, it was a normal good. But when VHS came around (half the price of Betamax), Beta became a luxury good and VHS became a normal good. That seems to be the correct analysis.

Again, to be applied to the world of computers. Mac’s are the luxury good that people want, however PCs are the normal goods that most people can afford.

I will complete this analysis of DRMed files later.

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