Once upon a time tobacco companies distributed abundant free samples. It's a good business model when you're selling an addictive product.
This holiday the kids have been piling up iOS games on their phones, mostly at $1 each. Since FairPlay DRM works on an iTunes/account basis, each app goes to four (soon five) iOS devices.
At 20 cents/app/phone this looks like a heck of a bargain -- but appearances are misleading. Increasingly the apps are entry points to a series of in-app purchases [1]. The real price is a cumulative sum; I'm guessing the average cost is more like $5 than $1. iOS games are rediscovering the Philip Morris business model.
This isn't necessarily a bad thing - for games. It means we can try quite a few games, and only spend money on those we really like.
It's certainly not a bad thing for experimental economists! The App Store is a wonderful model for exploring pricing strategies ...
[1] I don't know how FairPlay treats these. Are they tied to a particular devices or to the account? I suspect the former, which means the FairPlay redistribution (our five devices) becomes a feature, not a problem.
