Social production systems seem to deliver a much higher portion of the economic value created to the consumers than traditional production systems do.
As Tim O’Reilly says,
"if you look at … Ebay or Google, even though they're very, very successful companies, they're actually pretty generous in creating value for people outside the company".
This may be because peer producers could get restless if they felt that too much of the value they created was being appropriated by others. It could also be happening simply because the economics of social production make it possible for people to be generous.
But, Tom Evslin pointed out that generousity can be used as a competitive weapon.
"if we think of Craigslist's strategy, it's a brilliant anti-competitive strategy and I don't mean a value judgment by that. How do you compete with them? If you're not in the areas that they charge for, then you can't make any money because you can't charge for those areas either. So you can say, "Okay, well, I'll go compete in San Francisco by giving the ads away," but you don't have the readers in San Francisco. So what they've done is they've said that I've got the network effects from all the places that I give the ads away that I use to make the ads more valuable in the places that I sell them. And so I don't think it's just negligence that they haven't got around to charging for the other places. It's deliberately focusing the value on where they're extracting the money. It's like the Microsoft strategy of always pricing under Lotus, because you just don't want to leave any room for a competitor. And so here's the brilliant I'll price it free in most places so you can't go around me and get in anywhere, and I'll expect value from a few sweet places which you can't beat me there because the value I'm giving away for all the free places"
Whether this was conscious on Craig’s part or not, it has made it difficult for an entrepreneur to enter one of Craig’s markets with an offer that is less generous to the end consumers.
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