This is spot on, I've wondered about the economics of scarcity for a while. How does it apply to selling accounts for a hot web service? Maybe give them away for free while you're obscure, grant invitation privileges to the early adopters and start charging when the mass of users rolls in. Bonus points for raising the price, the more well-known you become. Can you share your success with the early adopters? Maybe allow them to sell their contingent of free accounts somehow?

"economics of scarcity"

The definition of economics is the study of resource allocation under scarcity. Giving away stuff for free is marketing, not economics.

You make it sound as though they're mutually exclusive. Economics is a body of knowledge. Marketing is an action.

Incidentally any action taken in a free market can be described in terms of Economics, even when there's no currency changing hands (e.g. opportunity costs on the part of the seller/buyer).

If you're looking for the scarcities in the "Economics of free," I think 2 are pretty straightforward: Buyers' and sellers' Time (current), and the sellers' Product (future) that's certain to follow any "free" strategy.

"Free" stuff still falls under the purview of economics because there is some scarcity lurking somewhere, as you correctly point out. It's just funny to read "economics of scarcity" if you are familiar with one of the traditional definitions of economics.

Well I guess you got me there, but you can give scarce stuff away for allocation...

"The economics of artificial scarcity," perhaps, is what he meant.

Would you pay to access Youtube? Facebook? or even Twitter? Most hot web services work only because they are 'free' for most users, scarcity doesn't help Youtube, Facebook,or Twitter. Think about all the pain caused with every Twitter outage. The early adopters simply get the 'I've been here longer than you' status when you display publicly how long they've been involved with your service.

You can reap other benefits from scarcity besides charging for the scarce product. To take an example from your list, I think "scarcity" helped Facebook a lot in the early days when you had to have a valid email address from one of a small list of schools in order to have an account.

What I had in mind is more the classic pay services, a là 37 signals and the pro flickr accounts. Currently they work by having a free trial or functionality-limited version. I read somewhere to charge the producers, not consumers of content.

a classic supply demand market for early adopters would work.

Give invitations for free while you are obscure

Grant 50 invitations to the early adopters

Start a bidding process for new adopters that closes every hour.

Thus allowing the early adopters to cash in on their invitations or give them away for free.

You control demand by selling your own unlimited supply of invitations (to cap the price or cap your expansion).

Apple's "botched" shortages get it access to the scarcest medium of all: TV news. All of the TV news broadcasts here in Toronto had a big story about the Canadian iPhone launch because long lines with ecstatic and dejected fans are perfect for TV. Using the Internet to form a queue wouldn't get TV coverage because there's nothing visual or emotional to show.

Is it just me or others agree that submitting Seth's posts on HN is a bit of cheeky karma-earning hack? Almost everything Seth writes is 'worth' submitting but given the high frequency of his posts, it's almost pointless to post them on HN.

I'm not one for bans, but I'd request people to take it easy on those Godin posts.