Lots of good examples here. Ariely's first 2 TED talks are great, but be careful with behavioral economics. For most start-ups, thinking about pricing in terms of hardcore microeconomic theory is probably a better route. The fact that so many digital goods truly have a marginal cost of 0 for the producer brings life back to the "Let's assume we have a constant marginal cost" phrase so many bright eyed Principles of Microeconomics students (and MBA students) have heard coming out of their economics professors' mouths. My point is that if something is a fact and not an assumption, then that's one less assumption you have to make.

In most markets, I'd say that setting the price for a product almost always boils down to 2 general concepts: market power and price elasticity.

Market power comes from producer theory and, generally speaking, refers to how much control you have over the price of your product. One way to think about market power is to start by thinking about the monopoly case. A monopolist, by definition, is the only firm in the market. A monopolist maximizes their profit at the quantity, call it Qx, where [MR = MC] OR [dTR/dQ = 0]. However, unlike a firm in a competitive market, a monopolist sells their good at the price associated with Qx in their own demand function (which for a monopolist is the market demand). Geometrically speaking, in a less-than-competitive market the "spread" that exists in the space below the demand function but above the marginal revenue function, and over quantities up to Qx, is semi-technically where market power can exist.

There are a couple different types of price elasticity. The most commonly discussed one usually refers to a product's own-price elasticity of demand (EoD), which is a measure of how much your quantity sold will change if you change your price by a little bit. Or in other words, it refers to how sensitive the consumers if your market are to changes in the price. For start-ups who have competitors, knowing your cross-price EoD would also be useful. If changes in your customers income in some way affects your business, then you could even think about the income EoD. Their are also types of elasticities which are meant to measure how sensitive consumers are to prices as time changes. Microeconomists and industrial organization economists have done a lot in this space. On another note, Bing Travel and their price predictor is a good example of some really sweet data on consumers temporal price elasticity of demand that I would love to get my hands on.

At the end of the day, a model is only so good. But models aren't meant to be absolute truths, their meant to guide your analysis. If you're product is something that no market currently exists for, then read up on the topic of market design. Al Roth at Harvard has some really great material and is perhaps the most influential market design economist to date. In my opinion, the most interesting ideas, concepts and theories from economics all stem from microeconomics. Current macroeconomic theory is a scary, scary place somewhere in a deep, dark hole. For a funny video on the matter: http://gregmankiw.blogspot.com/2012/01/home-for-holidays.htm...