Why Do Tier Levels Have Different Sizes/Prices?

[diamond Marchant]

In real life, it is not uncommon for the same product to have different prices. For example,  a person sitting next to you on a plane may have paid a different ticket price. Usually, the seller has good reasons. In Second Life, we pay Linden Lab  a fee called tier that allows us to possess land. However the cost per sqm varies based on how much tier we acquire. Why?

Also, why do the tier levels increase by a power of 2 for the first quarter region, then by quarter region chunks, making it likely that we will be buying more than we need? Why this complexity?

The data and line graph below shows shows the price differences. The data is annualized. Group bonus is omitted for simplification. An annual premium membership of $39 is used because $60 of stipend can be redeemed for dollars at today's exchange rate. The blue line shows the average cost per sqm for each tier level. The orange line is the marginal cost, computed as increase in cost to go to the next level divided by the increase in sqm. The last orange data point is the cost for all tier above a region, in 1/4 region chunks.

Edited May 13, 2022 by diamond Marchant

[Sylvia Tamalyn]

You could be making all those numbers up, and I'd never know. These charts are making my eyeballs bleed. 😂

[Qie Niangao]

You know you have to do this all over again in a week with the Premium Plus plan benefits, right?

(Who said "Excel is it's own punishment"?)

[Qie Niangao]

1 hour ago, diamond Marchant said:

Also, why do the tier levels increase (mostly) by a power of 2, [...]

Can we explain it by invoking alts to fill in missing tiers, to "fit the curve"?

One Bit Per Alt?

[diamond Marchant]

1 hour ago, Qie Niangao said:

You know you have to do this all over again in a week with the Premium Plus plan benefits, right?

Kinda did already. See Premium Plus Membership is a Good Deal.

[Qie Niangao]

2 hours ago, diamond Marchant said:

Kinda did already. See Premium Plus Membership is a Good Deal.

Interesting. I hadn't expected those assumptions but they're as good as any now, especially if the pricing assumes customers will put high value on non-land benefits of Plus.

What if they offer Plus and nobody comes to the party?

[Love Zhaoying]

13 hours ago, diamond Marchant said:

In real life, it is not uncommon for the same product to have different prices. For example,  a person sitting next to you on a plane may have paid a different ticket price. Usually, the seller has good reasons. In Second Life, we pay Linden Lab  a fee called tier that allows us to possess land. However the cost per sqm varies based on how much tier we acquire. Why?

Also, why do the tier levels increase by a power of 2 for the first quarter region, then by quarter region chunks, making it likely that we will be buying more than we need? Why this complexity?

The data and line graph below shows shows the price differences. The data is annualized. Group bonus is omitted for simplification. An annual premium membership of $39 is used because $60 of stipend can be redeemed for dollars at today's exchange rate. The blue line shows the average cost per sqm for each tier level. The orange line is the marginal cost, computed as increase in cost to go to the next level divided by the increase in sqm. The last orange data point is the cost for all tier above a region, in 1/4 region chunks.

"Why" questions are hard.

[diamond Marchant]

Why is tier organized and priced the way it is? The numbers reveal all...

The key numbers are the rate for the first 1024 (when you have no tier), the rate after you have a region of tier, and the repeating rate beyond a region.

These are all APPROXIMATELY THE SAME NUMBER.. 3.22 cents per square meter in this analysis!

This is the "sustain rate" that Linden Lab needs to maintain a sustainable margin and make their financials look good.

The rates from 512 to 16384 are the "sweet spot" where tier is more profitable. Beyond a quarter region, marginal rates decline so as to converge to the sustain rate.

The sustain rate also allows land barons to operate profitably, which Linden Lab probably enjoys.

Why is Linden Lab introducing Premium Plus? I speculate that the "sweet spot" needs to be made less sweet. Premium Plus gives residents the "sustain rate" for 2048 sqm, which should cause more residents to own land and perhaps, stick around longer.