I've reviewed my macroeconomics notes a gazillion times, and I'm convinced I won't remember anything more if I continue to recite definitions for the next two hours. So instead of continuing my bout of superfluous studying, I'm going to weigh in on the App Store pricing debate.

Since it's debut in the summer of 2008, many pundits have criticized the downward trend in application prices on the App Store. They argue, quite reasonably, that a norm of super-low prices has driven all kinds of quality out of the market. But then many of them add some commentary about the cheap applications conditioning people into thinking all applications should be cheap. I suspect the market breakdown is more a flavor of the "lemons problem" as made popular (among academics) by George Akerlof's famous paper on the market for used cars. (Lemons refer to bad used cars, not the fruit.) In other words, people are only reluctant to spend money on applications because they have little or no idea whether an application is worth more than $0.99.

Certainly, my problem with the App Store has always been the lack of information about particular applications — the symptom of a market with problems due to information asymmetry. Namely, I have virtually no idea whether an application will be a high quality application or not when I click the "Buy" button in iTunes. Some would point to user reviews as a way to reduce asymmetry, but I have a hard time gauging how much I will like the application based on the shallow commentary of a random stranger.

I only bought a $20 copy of OmniFocus for the iPhone because I knew the Omni Group has a strong reputation, and because I figured the iPhone client must be at least as good as its desktop counterpart. And even then, I worried that I might have paid $20 for a clunky, inoperable piece of software. Likewise, I have been reluctant to buy a copy of Tweetie for the iPhone, despite its relatively low price and the bevy of positive reviews from reputable sources, precisely because I cannot try it out.

More recently, the fine folks at Wolfram Research released a Wolfram Alpha application for the iPhone. Much to my surprise, they priced it at $50. A number of technology bloggers (e.g., John Gruber) have applauded the move, claiming that it represents a return to prices that allow developers to create high-quality applications. But my objection to the $50 price tag on the Wolfram Alpha application has nothing to do with an intrinsic opposition to paying for software. Rather, I don't understand how they expect anyone to pay $50 for an application that offers content no different than what one can access through the iPhone's web browser. It's called a single-price monopoly folks.

Fortunately, there is a possible light at the end of the tunnel. Apple recently allowed developers to do in-application purchases in free applications. This opens the door for developers to offer a free, but crippled, application that can be easily upgraded, the same sort of model most Mac desktop software uses. It's certainly the only reason I paid my $80 for a copy of Panic's Coda software.