A short while ago, steam introduced refunds, with the somewhat bizarre idea that a legitimate reason for a discount is ‘its on sale cheaper now’. People rejoiced, but one side effect of this was to screw up the old system of one-day ‘flash’ sales. A lot of people get confused as to the real reason behind quick ‘one day’ and ‘flash’ sales. People sometimes think its purely to introduce a ‘false’ sense of urgency and encourage impulse buys, but the real reason is very different.

The holy grail of economics is per-user pricing. If you make a game, it has a different value for every potential customer, based on their fandom, their desire for new games, their income, their mood and so on. In an ideal world, the price always matches the value. Unfortunately, people get very upset when they discover that everyone has paid a different price, except in flights and hotel bookings where somehow we accept it.

Anyway… companies normally do their best to maximize income in this way by ‘market segmentation’. That basically means getting the rich to pay more and letting the poor pay less. This happens all the time. Movies are cheaper during the day (for retired people and students have less money and yet are free this time). Movies also offer ‘premier’ seats that cost 5% more to make but cost 40% more. Restaurants sometimes have ‘meal deals’ with coupons in cheap magazines or on ‘discount coupon’ websites, so people who don’t care where they dine can get a better deal than the wealthier spur-of-the-moment diners.

Steam flash sales did this too. Some people are too busy (have jobs, just don’t care about discounts much) to check steam EVERY day during a sale to see what is cheap. They often miss one-day or flash sales, but they don’t care. A game is $5 instead of $7, who cares? On the other hand the super-time-rich and cash-poor students will happily check a website every day to save $2. Thus…everyone is a winner, the poor pay less, rich pay more, devs earn more.

The current steam refund system kills that. The flash sale now always lasts at least two weeks, meaning that level of price discrimination is unavailable. The existence of shady/illegal grey-market re-sellers has exactly the same impact. Refunds & grey market means less price-discrimination and less deep discounts.

So if you think the current steam discounts are less generous that’s why. Don’t blame us, its just economics and maths. And where steam leads, others follow, so I conclude that the days of deep discounts are over.