Do you want a free TV?

What does it mean that the marginal cost of producing one more unit of “whatever” is close to zero? In a competitive market it means that the price that you can sell that additional unit is also close to zero…

Anyway, this is not a post about economics but it relates to it.  SaaS (Software as a Service) firms have been growing like mushrooms over the last few years because of the theory of marginal cost, it costs them almost zero to add one more user/client to a platform that is hosted on the web. So,  if they can charge a few bucks for each one of them they can make a small unit profit. Now take that and multiply it but large volume of users/clients and you have very profitable firms. Well, these markets are getting very competitive and there are already some very successful free SAS companies.

Will hardware follow the same path? Will the marginal cost of producing new hardware be so low that we will eventually get access to free hardware? I say yes, that is my theory.

What is yours?

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