My fourteen-year-old grandson tells me that he got the iPhone app GraphCalc for free a few months ago. When he looked recently, he noticed that Apple is now charging $0.99 for this very popular app. Clearly, Apple realized that the demand curve was further out along the supply curve than they had believed, and they priced accordingly. I wonder if this is standard policy with them, as I haven’t noticed this behavior before. My guess is that they do this fairly often, but don’t go higher than $0.99 on most simple user-supplied apps: Like me, many users are willing to pay $0.99 for an app, but are turned off by any price above that.
What’s the Magic Price?