> OTOH, you have the single European market (the EU forces games, apps, hardware, etc to be sold at the same price everywhere in the EU in practical terms),

That's not true, where are you imagining this from? Hardware certainly doesn't cost the same, at the very least there are different VAT levels, but also pricing is adapted to the local market (literally just checked, i can get an Asus ROG Zephyrus G14 for 300€ less in Bulgaria compared to France). Software I'm unsure how to check, but Netflix costs varies by county.

That's kinda messed up. ALL hardware?

How can you fit that much misinformation into one comment? EU != Europe. Russia is not in the EU. Nor is it completely russian. Only a select number of countries in Europe is part of the EU.

And there is no such thing as consistent, EU-enforced pricing. Get out of here ...

It's really the opposite, it's a form of price discrimination.

There's a theory of surplus in economics, which is the extra benefit that someone gets from a transaction above what they would have been willing to pay.

If I buy a game that I would have paid $100 for for $50, then I have a "$50" consumer surplus. One the other end, if the producer was willing to let that game sell as low as $40, then they have a producer surplus.

Profit seeking producers want to capture as much as the surplus as they can, and they do this through price discrimination. You see this in product as two things that are essentially the same but with different marketing etc.,

Price discrimination based on geography is quite effective though as well. People with lower incomes aren't as willing to pay high prices for games. Countries can be effectively segmented based on geography (whether virtually or not), and through this producers can charge a higher price to countries with high incomes (taking away the consumer surplus they would have had vs a lower global optimal price), and still get some value out of consumers in lower income countries.

So it's not that NA is subsidizing the market, so much as it is the company trying to squeeze the most of everyone. Now, you could call it subsidizing in that there are probably products that wouldn't be brought to market without the NA market to pay for them, but that's not really "subsidizing".

It isn't really subsidizing because the goods are virtual which means the marginal costs are minimal. There of course could be infrastructure costs to get up and running in a new country. However once that is done, almost all the marginal revenue developers get out of these additional markets is profit because there is practically no cost to selling an extra copy even if it is at an extremely steep discount.

> the main North American market is subsidizing the apps being produced and sold worldwide

I think you'll find that this has been the practice for many decades. A stark example is medicine pricing.

Entire reseller websites (e.g. g2a) of games and software alike have popped up trying to profit from this arbitrage opportunity. You buy games in Russia and an American scoops up the license key for a little more, it’s all automated too nowadays.

On the same note, why are Levi’s jeans $100 bucks in Europe, but $40 in the USA? They’re probably coming out of the same Asian factory. Not an economist but different value propositions I guess.

Something else to consider is motivating piracy. If they sell a piece of software for a flat price in all geos, the ones who can't afford it will invest more time in pirating the software. As a side effect, piracy is normalized in those communities as a necessary way of life in the digital world. Naturally, their tools and methods will leak out to other communities and make piracy easier in places that CAN afford them. Devs would rather sell to those communities at a "loss" than ostracize them and deal with the fallout.

Check out this brief description of how software proliferated in Poland during the early years of computers (3:09-8:27): https://youtu.be/ffngZOB1U2A

Well, the economy of that is sketchy in that multinational corporations pay sometimes an order of magnitude less for the exact same job simply due to you living in a different country.

I think it applied to DVDs in the past and was impetus behind region locking media. Also another way to look at it is less subsidizing and more maximizing profit by not leaving money on the table in foreign countries.

It could also be said that the cost of compliance and the cost coming from the litigiousness of American consumers shouldn't be subsidized by countries where selling an app is monumentally easiest and cheaper.

It applies to video games and software for sure. I think this is why it is almost always cheaper to buy a code online for something like a Microsoft product.

>It sounds like the main North American market is subsidizing the apps being produced and sold worldwide.

Yep. Even ad supported apps are subsidized by NA users.