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In economics, a damaged good is a good that has been deliberately limited in performance, quality or utility[1][2][3], typically for marketing reasons as part of a strategy of product differentiation.

Contents

Computer software

Deliberately limited programs are usually freeware versions of computer programs that lack the most advanced (or in some cases, even crucial) features of the original program. Limited versions are made available in order to increase the popularity of the full program without giving it away free. An example of crippleware is a word processor that cannot save or print. However, crippleware programs can also differentiate between tiers of paying software customers. A well known example is the Microsoft Windows pricing model.

The term "crippleware" is sometimes used to describe software products whose functions have been limited (or "crippled") with the sole purpose of encouraging or requiring the user to pay for those functions (either by paying a one-time fee or an on-going subscription fee)[4][5][6].

There are several types of deliberately limited programs:

  • The full program with the features disabled; this type can be "unlocked" into a fully functional version of the software, usually via a serial number. One such example of this is the Adobe Creative Suite 4 trial downloads
  • A special trial version of the program that does not even include the executable code for the disabled features. In this case, only users who buy a licence are given access to another version of the program, which is fully functional.
  • The functionality of the software or hardware is permanently compromised from full functionality due to third party agreements. some General Licence Programs display this property
  • The vendor includes a clause that features time limits to mar functionality. For example, the freeware version of Fraps has in-game video recording time restricted to 30 seconds, and with a Fraps logo on the video.

To create a limited program usually requires the manufacturer or author to take active steps to reduce the capabilities that the hardware or software could otherwise handle. For example, Windows Vista Starter is restricted to running a maximum of three concurrent applications beyond those specified by Microsoft as basic system requirements.

Computer hardware

This product differentiation strategy has also been used in hardware products:

  • the Intel 486SX which was a 486DX with the FPU removed or in early versions present but disabled[4]
  • Powerware has a line of UPS models that can be upgraded in the field (without replacing any components) to the top model (15 kVA). That is, all the models are equal, but the lower ones are sold with a power limit, which can be removed for a price.[citation needed]
  • Suunto sold a line of dive computers that included the Favor and the Octopus II. The major difference between these two was that if the diver was doing a decompresson dive the Favor would display the amount of decompression time needed. The Octopus II would not display that time, although it would keep track of it (at the stop it would show a warning while the diver needed to wait before continuing his ascent. In the same circumstances the Favor would display a countdown)[7]. The Favor was about 1/3rd more expensive than the Octopus II (about 200 euros versus 150).
  • Casio fx-82es has the same rom as fx-991es. However the advanced functions are simply disabled.[8]

Digital rights management

Digital rights management is another example of this product differentiation strategy.[3] Digital files are inherently capable of being copied perfectly in unlimited quantities; digital rights management aims to remove the (from the producer's viewpoint) excess utility to the user from this capability by using hardware or cryptographic techniques to limit copying or playback.

Cars

This product differentiation strategy has also been used in the car market. In cars the motivation for is more usually trying to prevent a lower model from cannibalizing the sales of a higher model.

  • The Mazda 2's 1.3l engine can have either 75 or 86 PS with the only difference being the ECU programming and the price[9][10].
  • When the Golf V GTI was introduced its engine developed only 200 hp (150 kW) (tuners were able to increase that to 246 hp (183 kW) by reprogramming the ECU[11] and currently that engine is available in several levels of power: 230 hp (170 kW) (GTI Edition 30), 241 hp (180 kW) (Seat Leon Cupra), 265 hp (198 kW) (Audi S3), although with some mechanical differences). It was suspected that this was to protect the R32 model equipped with the VR6 engine which has only 250 hp (190 kW).
  • The same engine when it first appeared in the Seat Leon had even less power - 185 hp (138 kW) - possibly because in the hierarchy of the Volkswagen Group marques, Seat is lower than VW.[citation needed]
  • Porsche deliberately limits their Boxster and Boxster S to 10 fewer horsepower than its hard top sibling, the Cayman and Cayman S.[citation needed]

See also

References

  1. ^ Preston McAfee (May 11, 2007). "Pricing Damaged Goods". http://www.economics-ejournal.org/economics/journalarticles/2007-1. Retrieved 2010-02-15. 
  2. ^ Jong-Hee Hahn (Spring 2006). "Damaged Durable Goods". http://www.jstor.org/pss/25046230. Retrieved 2010-02-15. 
  3. ^ a b Andrew M. Odlyzko (July 27, 2003). "Privacy, Economics, and Price Discrimination on the Internet". https://www.dtc.umn.edu/~odlyzko/doc/privacy.economics.pdf. Retrieved 2010-02-15. 
  4. ^ a b "Crippleware — a definition from The New Hacker's Dictionary". http://home.att.net/~srschmitt/jargonfile/jargon_file-152.html. 
  5. ^ "Crippleware — a definition from Whatis.com". http://whatis.techtarget.com/definition/0,,sid9_gci862925,00.html. 
  6. ^ "Crippleware — a word definition from Webopedia". http://www.webopedia.com/TERM/C/crippleware.html. 
  7. ^ "Manual for Favor, Favor Lux, Favor Lux S, Fusion Lux S and Octopus II in English". http://media.suunto.com/media/suunto/manuals/en_US/Favor_Lux_S_OctopusII_manual_en_10c59.pdf. 
  8. ^ "How to upgrade your fx-82es, fx-83es and fx-85es to a fx991es". http://www.thestudentroom.co.uk/showthread.php?t=557455. 
  9. ^ "4Rodas.pt Mazda 2". http://www.4rodaspt.com/2007/09/26/mazda-2.html. 
  10. ^ "4Rodas.pt Mazda 2 translated". http://translate.google.pt/translate?u=http%3A%2F%2Fwww.4rodaspt.com%2F2007%2F09%2F26%2Fmazda-2.html&sl=pt&tl=en&hl=pt-PT&ie=UTF-8. 
  11. ^ "Performance "Chip" ECU Tuning for Volkswagen Golf, GTI, Jetta, EOS, and B6 Passat 2.0T". http://shop.achtuning.com/index.asp?PageAction=VIEWPROD&ProdID=530. 

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