But this is one area where traditional economics and popular belief might not be correct. There's another cost when making purchasing decisions--choice in and of itself is a cost, usually expressed as a transactional inefficiency based on the cost of reducing information asymmetry (i.e. researching brands). In other words, the more choice we have, the tougher it is to learn everything necessary to make the choice, and the more expensive the decision becomes.
A practical example, from the automobile market, would be Honda versus GM. Honda produces one model to fit each vehicle segment it wants to play in--one minivan, one full-size sedan, one compact, etc. GM has dozens of brands all competing with one another. Honda has been a runaway success with its business model (part of that is production efficiencies that Honda gets by having fewer models), while GM has run into a trouble.
Those of us who know more about computers tend not to consider this choice-based transactional cost (the cost of aggregating knowledge about what choices are available) because we already know more about the market, and so bear less of a burden in finding all the information necessary. For those who know less, though, this cost of choosing is greater. In fact, less-informed buyers may prefer fewer choices (all made by a brand of consistently high quality that they trust) to facing a wide variety of options all with varying quality. That's why people who just want a car that runs buy a Honda without thinking too hard, while car nuts spend a lot of time looking at dozens of brands.
So the question is this: Is there a significant market of customers for whom the transactional cost of accumulating knowledge about brands is so high that they simply prefer having fewer choices? If so, this could allow Apple to continue to successfully compete against Linux on the desktop--because it takes one look at the way the Linux market works to see that it's highly fragmented. That's great for techies, who benefit from the choice that fragmentation offers; but for non-techies, Apple could still have quite a future if it fits the Honda business model.
Derek Moeller
Northwestern University
