Pricing Models

Commercial Version Fixed Pricing Proposal

The wider distribution of OLPC via commercial channels helps in more ways than just subsidizing new machines for developing contries. In particular, a commercial versions would:

• Improve production economics, i.e. economies of scale
• Improve the project visibility via commercial success. It's far easier to argue that the OLPC is a better choice, if it beats competition also in the commercial market.
• Improve the product awareness. More people would become familiar with the laptop design and functionality via first-hand experience. This is essential in order to gain active support from external individuals and groups. It's more difficult to become passionate about a set of specs (and an educational model) only seen on paper. Seeing the design work well with your own sons is a much more convincing experience.
• Improve contributions/developer participation: like all open source projects, more users = more contributions. If you are a developer and your sons use the laptop it is much more likely for you to contribute a new game or some educational software or some media work.

The subsidy is only part of the equation, in fact, in the first stage of adoption the aspects above arguably play a far more decisive role than the embedded subsidy. Hence it would make sense to push such aspects more in the first stage, while pushing more the subsidy later on.

What price model can achive that?

Having a price set at 2*current production/distribution costs does not cut it, since that is equivalent to provide the subsidy the same preminence across the life of the product cycle, while sacrificying other aspects. But a fixed price for the commercial version, set at 2*long term production/distribution costs = $200, would probably serve better the OLPC cause. At the beginning of the product cycle the subsidy would be minimal, but that would more than compensated by the advantages above, later in the cycle the subsidy would become a more important component (exactly matching the other pricing plan).

Hence we argue that the commercial version offer should not be time limited and that the price should be set at $200 (Agostino Russo).