Musings: where’s the Nash equilibrium???


Picture by:
Tom Caggiano

Without the subway, there would be no NYC. Yet, from a business perspective, the MTA is losing money. Solution? Create competition, at which point the management would have to undergo dramatic changes, but this is problematic at best: how do you create competition in an industry that has a single vein? Different companies take care of different lines, perhaps? That could turn into a management nightmare, not to mention the immediate consequences of increased prices, which would negatively impact the of the city. So the service is subsidized by the government.

Software world seems to also have equivalents. For instance, we need an installation authoring tool. The only companies out there that have high-enough quality and feature set (InstallShield and Wise) charge over 1,000 for their products, which is often too much for companies to spend. So the result is that fewer companies put out products, which results in lower competition, which lowers revenue for those same companies that jack up the prices for the installation-making tools in the first place. Solution:

1. Good-will license – use of software until revenue is generated, at which time the company pays a flat fee that can even be higher than the off-the-shelf price.
2. Subsidies by the government – offers small business support when purchasing software for development of other products
3. Downloading hacked versions/hacking yourself the products that are too expensive to pay for.

Any other solutions? Purpose: increase revenue for all players.

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