Re: [alac] verisign-settlement

["John R Levine" <johnl@xxxxxxxx>]

> It is extremely dangerous to shift the comparison from the production cost
> (which is going down) to the use value (which is at least stable, if not
> increasing), because on that turf we might be losers.

Agreed.  This is why the economic analysis is important.

In any economic transaction there is the concept of consumer surplus,
which is the difference between what someone would be willing to pay (the
value) and what one actually pays (the price).  If someone would pay $30
for a domain name but it only costs $10, that $20 difference is the
consumer surplus, a measure of how much benefit buyers get from the
transacion.

In a competitive environment, sellers' prices are pushed down close to
their costs, which maxizes consumer surplus.  In a monopoly, the seller
raises prices to the maximum that buyers will pay, capturing the consumer
surplus for itself.

That's the basic rationale for regulating monopolies, to give the buyers
back the consumer surplus they'd have if there were competition, and
that's why it's important to understand to what extent .COM functions as a
monopoly.

We all know that domain buyers think that domains are worth more than they
pay for them.  That's not under debate, since if they didn't, the buyers
wouldn't buy them.  The question is whether and why it would be in the
community's interest to transfer part of the surplus from every buyer to
Verisign.

Here's a straw man that may help evaluate scenarios.  If buyers consider
domains so valuable, why not raise the price from $6 to $50 or $100?  I
bought a few domains back when they cost $50 (and $50 then is $65 today),
so it clearly wouldn't be a problem.  Or would it?

Regards,
John Levine, johnl@xxxxxxxx, Primary Perpetrator of "The Internet for Dummies",
Information Superhighwayman wanna-be, http://www.johnlevine.com, Mayor
"I shook hands with Senators Dole and Inouye," said Tom, disarmingly.