Though after watching the above commercial (and those like it) an ignorant observer would never believe that a Mac user would ever want to purchase a Windows based computer (or even interact with the Windows OS in any way, shape or form, since they are much to “cool”) there are Mac users which currently use Windows XP on their Macs. As many of you know, Microsoft has recently released Windows Vista, the newest version of Windows, for which there are 4 distinct (and distinctly priced) versions: Home Basic ($199), Home Premium ($239), Business ($299), and Ultimate ($399), from which users are able to choose based on their needs. According to this article published on MacWorld.com though, Microsoft is furthering its use of price discrimination by forcing Mac users which want to run Vista on their computers to purchase either the Business or Ultimate versions (the two highest priced!) by including a clause in the EULA (End User License Agreement) for Vista which forbids the installation of either Home version on a non-Windows based PC. While Microsoft’s decision to publish four distinct versions of its own product for the Windows based PC could be the subject of research on price discrimination product cannibalism, taking a quick look at price discrimination for Mac users is very interesting.
How does this price discrimination affect Macintosh users though? They surely don’t NEED to install Windows, and if their reservation prices are below those of either Business or Ultimate edition then they are effectively priced out of the market, right? Not so fast. In his blog, Tom Bozzo, an economist by trade, states that he will not be installing
This scenario is what Microsoft had hoped for; considering that their company statement on the issue reads “Home users have rarely requested virtualization and so it will not be supported in Microsoft Windows Vista Home Basic and Home Premium SKUs.” Microsoft believes they can extract much of the consumer surplus from businesses who would normally buy the Home Basic version, just so that they could run their third party programs which run only on a Windows OS, but have much higher reservation prices than $199, since there are no substitutes to Windows in this case. By forcing businesses to purchase the higher priced versions, Microsoft is extracting much of the consumer surplus that would exist if these businesses were able to purchase the cheaper versions. They believe that this increase in producer surplus will outweigh the loss of producer surplus from people who use Macs in their home who are priced out of the market due to price discrimination. While this may be good in theory, it will be a while before we find out of Microsoft has effectively priced an entire portion of the population out of the market, or if they have designed a price discrimination strategy which will extract a significant portion of the consumer surplus.
1 comment:
Most courts have held that EULA's are non-enforceable "shrink-wrap contracts," as they are presented to the consumer after purchase of the product and after opening (which generally means that it can't be returned), forcing the consumer to either accept terms they don't agree to or lose money by rejecting the terms on a now unreturnable item. Software companies still add EULA's for their own sake, but for the most part, they are worthless.
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