But the psychological impact of the numbers on the potential buyers is pretty important for Arcen's sales and thus future. I'm no expert, but $19.99 is a big watershed line for a lot of people between something they'll buy on an impulse (no pun intended) and something that gets much more scrutiny. I don't think anything would be gained by increasing the base game past $20.
Yep, totally agree. Increasing the price any more wouldn't deter the diehards, but it would seriously crimp sales to a lot of folks and so would ultimately lead to a lower return for Arcen.
But for the expansion it's kinda tricky to say: who's in the buyer market for the expansion anyway? Lines like the $20 one are much more important for sight-unseen buyers; I have to assume that the main market for the expansion is people who've already played the game a fair bit 
But sometimes seeing an expansion out for a game is a good motivation to go take a look for the first time; it's tricky to say.
The main market is definitely existing players, but as you say this can also be a driver of sales of the base game, too. It's also another way to get more publicity, as expansions are reviewed as separate items in magazines/websites/blogs, and they are listed as a separate item on distribution sites. In the case of reviews, the expansion really needs to be exceptional to get a whole lot of notice. Sure, people will review pretty much any expansion to a game that was popular enough, but so often the response is sort of "meh, if you really like the base game, this is for you, but otherwise..."
AI War has improved so much since a lot of places reviewed the original base game, and I'd really like to capitalize on that in reviews with the expansion. So the expansion should be amazing in every way, providing an experience that is both more and different from the base game -- something that reviewers will hopefully deem such a good deal that even sort of casual players of the game would do well to consider it.
Of course, that's also simply the sort of expansions I like to buy, and where I'd like to see the game go. But my point is simply that income from the expansion itself is not my only concern when designing and pricing the expansion. It's also, like all expansions for any game, a publicity tool to help create another round of sales of the base game in addition. For someone buying both at once (as I tend to like to, myself, when I am really sold on a game), there are certain price expectations for the cost of the expansion versus the base game.
I'd say $12-$13 is a decent point for an expansion for psychological reasons. I hope this doesn't come out the wrong way, but one thing to do is break up your total planned expansion content into chunks where that price makes sense. Meaning more expansions rather than stuffing everything you can into one. On the other hand you probably don't want to go the Sims route.
Well, bear in mind that my cost-to-benefit ratio for producing goods is different from the cost-to-benefit ratio for players in buying the same goods. This is true for any game company, of course, but since I don't have any stockholders to please I have a lot more latitude to do what I like.
In general, producing new ships for AI War is fairly inexpensive for me to do, in the main. It's certainly a lot less costly than a lot of the things that I give away for free, such as the revamped economy, all the new art over the last few releases, etc.
This disconnect would be rather troubling to your average investor, but for me it makes sense -- with all of the content in 2.0, I'm investing in future sales of the base game, as well as making the game more attractive to large distribution channels (we landed the biggest deal
solely because of our 2.0 updates, incidentally). So this makes sense as an investment for Arcen, because the return is likely to far outstrip my actual investment if things go at all as I hope they will. And for players, of course that is a huge win because they get a LOT of stuff for free, so everyone is happy.
Then, with the expansions, I'm mostly focusing on things that are easy-ish to code, but which have a huge impact on the scope of the game. Thus, in the end, I wind up doing a lot less work for the expansion than I did for the 2.0 release (including all the releases since 1.001 before that), but actually charging something for the expansion. Go figure. But, because it takes less resources to produce these sorts of thing, I tend to try to pack a LOT of it in there, to really give players a value for their money. It's more value for less money compared to what other developers would provide, but I'm happy to do that because it doesn't cost me all that much and it makes everyone (including me) happy to see the game make such leaps forward.
This disconnect between the cost to produce goods and the cost for customers to buy them is something that is often a challenge. The two general responses in this industry are:
A) If a good is expensive to produce for a platform, pass that cost on to the customer.
B) If a good is cheaper to produce for a platform, then hooray! Bank the difference as profit.
As an indie developer I can never have the A situation simply because our overhead is lower than a AAA studio no matter how you cut it. You could argue that I could have a situation like A, where the cost to develop a game is greater than the price point at which an indie game can be sold, but that has yet to be an issue, and if it ever were a problem I would hope to use overflows from sales of other titles to make up the difference.
For the issue of B, that is a tougher one. Of course, I'm hoping to make profit just like any other business. But there's also no call for charging $3 for a new saddle for your mount (as in the famous Oblivion example), or for being stingy with content just because everyone else is. Fact is, as a company we are very fast at making high quality products, and I think that we're not the only ones that should benefit from this. Sure, we can use that to make more products in less time, which results in a higher overall return, but why not also use that to pack more into each of those titles, thus giving players an even better value for the money they spend? That, to me, seems like it can only lead to good things, such as increased customer loyalty, more excitement about our products, and better word of mouth and reviews. That's my rationale, anyway!
Honestly I think you guys will do great, Arcen is fast becoming my favorite dev, at least 
Thanks!
