How Much Is Your iPhone App?

The care and feeding of my iPhone is an interesting illustration of the role of competition and the ability of suppliers to price-discriminate. I wanted apps that would translate words (no need for full phrases or sentences — that’s done nicely on between German and English, and between Dutch and English. There were expensive ones, but the Dutch/English app was $24.99, while the German/English app was “only” $19.99. That was far beyond my price range, so I shopped for cheap ones. The cheap German app was $0.99; the cheap Dutch app $1.99. The German apps at each level of complexity were more numerous than the Dutch, so it’s not surprising that with more competition they should be less expensive. I wonder if this is the kind of difference pervades the sale of iPhone apps?

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  1. Frank says:

    It seems apple uses price discrimination in more than just their iPhone apps. I think first degree price discrimination, such as buying a car, should be used in any transaction (whether how cumbersome it may be for that particular exchange). There is no such thing as a market for something, unless there is an active buyer and seller. In any case, I believe competition will reduce cost, iPhone apps included. Just like when the first DVD player came on the market for over $500 dollars, as soon as the technology spread…it forces the market down to merely 20 bucks today at walmart.

    On to the bigger issue – apple found that they own a monster portion of the mp3 player market…therefore, they set in place a sort of price floor, that their ipods will never go below upon new arrival. They’ve built this in place so that when new items hit the street, it is no surprise to consumers. However, when iTunes started charging $1.29 for all the new songs (or “hot” songs like holiday music after Thanksgiving) people were in an uproar – but guess what, they paid anyway….as they always will when there’s a demand

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  2. Colin says:

    These will become moot once google iPhonifies – which I’d bet will happen within the next month tops. Once again Google does something valuable, better, for free.

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  3. Frank says:

    Sorry – update…I didn’t mean to compare apple’s use of price discrimination to “first degree” as it may appear in the above post.

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  4. Colin says:

    And to append to my above post [#2], Google will likely bypass the App Store completely in favor of creating a web app that is just as useable but not subject to Apple’s draconian restrictions. Ultimately they may be able to wipe out an entire category of iPhone app without even setting foot in the App Store.

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  5. MikeM says:

    I’m not an economist, but I thought price discrimination was something different. I thought it was offering the same good in different markets or at different consumers at different prices. This is two distinct products, with different supply and demand curves.

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  6. Ben D says:

    what’s wrong with google translate?

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  7. KB says:

    That’s pretty neat how it works out with complexity/programming difficulty. How do other apps price? I remember seeing some by donation.

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  8. Tim Novikoff says:

    SAT vs. GRE

    I made an iPhone app for studying SAT vocabulary words using word roots. It’s called Flash of Genius: SAT Vocab. I sell it for 99 cents and it sells well.

    I will be releasing a GRE version soon, and I’m considering charging $4.99 even though it will be essentially the same app but with more obscure words.

    My theory is that college students essentially recognize that the “expected value” of studying vocabulary words before an exam like that is quite high, whereas high school students don’t realize the value of studying vocabulary words. Of course, I don’t really know what the most profitable price points are; I’m just taking a wild guess, like most developers. But I did notice that GRE apps tend to be more than SAT apps in general.

    Another interesting question is pricing on Android Marketplace vs. iPhone App Store. This is seemingly the perfect way to do price discrimination, since iPhone owners are probably more affluent. My guess is that you’ll see a lot of this type of price discrimination.

    Not from me though; I’ll be selling Flash of Genius: SAT Vocab for 99 cents on all platforms, I think. I just find the volume more satisfying than the higher margins. (I think a lot of independent software developers prefer the satisfaction of knowing their software is being widely used to more money.)

    Except I plan on releasing a free version on the One Laptop Per Child devices. I’m looking for a developer to do this mostly pro bono, by the way. Any OLPC developers out there want to join me in making a great vocab app for the $100 laptop? (The Android version was recently voted into the Top 10 in the Android Developer’s Challenge. I think this is legitimately a good app and it would be a great thing to make it available for free in the third world.)

    -Tim Novikoff
    Flash of Genius

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