ChrisA said:
But still it's an interresting question: What do you charge for a product that costs nearly nothing to manufacture?
I've read a number of articles and "insider" discussions about sofware pricing, and most agree that it is a dark art, and in many cases doesn't even make sense by traditional laws of supply and demand. In some cases, people will buy a product just because it's more expensive so it looks more important, in others they just aren't willing to pay what a product is worth to them for one reason or another (most often these days because of good open-source projects, in others because a company destroyed the market with a product like IE for free, or iMovie for cheap on the Mac).
In any case, the theoretical correct answer to the above question from a "fair" standpoint would be "Whatever the lowest price that allows you about break even and pay you and your employees a fair wage for the work they have and will continue to do on the product."
In areas with competition, one might guess that's pretty much where the price settles--assuming development time is similar for similar products, the prices will force each other down until they hit a stable point. Nobody can afford to go lower, and products that took more work theoretically have features or polish to justify the additional cost relative to their competitors.
But when you're nearly the only product in the space, like with Parallels (current open source solutions aren't yet competitive in practical terms), you can charge whatever the market will bear, because you've got a monopoly, and often the lowest price isn't the one that makes you the most profit.
I consider MS Office to be the ultimate offensive example--it only takes a quick look at the financial statements of Microsoft to see that the office software division takes in something like four times their costs to develop products. At the volumes it sells at, Office development obviously doesn't cost a fraction of the $400 MS charges for it, yet at that price since they have wiped out nearly all competition they STILL manage to sell a license to nearly every business computer in the US, if not the world. Why charge $100 when you'd sell just as many copies at four times the price? In most other industries (or even software areas) competitive pressure would force the price down, but they've managed to create and lock in their monopoly, so they can keep the price drastically inflated. (And, I might add, use the profits to maintain the monopoly or fund monopoly development in other areas, since the US government has given up on trying to stop them.)
