This is all an uncomfortable, extreme example of customer manipulation...but that's what we have to accept to remain a (mostly) free market economy. The most successful companies intentionally set an uncomfortably high overprice that is just a tick below the figure that the majority of customers will refuse to pay.
I've used coffee franchises (Starbucks, Dunkin' Donuts, etc.) as an example - is that flavored water absurdly overpriced at $3? Holy Moses yes! Is it less painful than most people can stand? Juuuuuust barely. Total revenue maximization, it's a bitch. :-/
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Yeah I think this will become harder to pull off in a more competitive next-gen market. More and more titles are on the way, and overpriced DLC will be a lot easier to pass up when you've got a library of new games to choose from.
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False equivalence. A cheaper game does not mean a better game, nor does it mean that it will provide the same type of experience. Having more choice, while better for open/free markets, does not dictate that the other choices provide the same or even reasonably close value. Ever hear the expression [quote]a man will pay $2 for a $1 item he needs, a woman will pay $1 for an item she does not need but is on sale.[/quote] This type of reasoning can also be applied to vehicles, they all get you around, but some are better on gas, some come with other amenities, etc. etc. and they all cost different prices, it comes down to preference and the type of things you expect out of a vehicle. According to your reasoning two vehicles that are comparably equipped (i.e. similar features and gas mileage) should cost the same, but that's not the case. Video Games are no different than any other product in a highly competitive market.