How to win an unwinnable war: get the enemy to buy weapons from you

I was having this argument with someone about how Microsoft doesn't offer Office for Mac as part of The Ultimate Steal.

I reckon that Office for Mac helps to increase Microsoft's market share, by inducing people to a buy Microsoft product, who otherwise wouldn't use any Microsoft products at all. By this argument it would benefit Microsoft to include Office for Mac in The Ultimate Steal.

The other person argued that Office for Mac acts as competition to Microsoft by making it easier for Microsoft users to migrate to a Mac, so supporting Office for Mac would decrease Microsoft's market share. This would mean it's best for Microsoft to do as they're doing and exclude Office for Mac from The Ultimate Steal.

The difference between the two arguments hinges on your opinion of how easy it is to switch operating systems. If your choice of operating system is no more than an optimisation problem over the set of software you want to use, then a better office suite in the other OS may be all it takes to make you switch. In that case, Office for Mac is bad for Microsoft. On the other hand, if your choice of operating system is more fundamental - more in the order of a choice of identity - then nothing is going to make you switch. If Microsoft can get such a Mac adherent to spend a single dollar on Microsoft products, they win; so in this case Office for Mac is good for Microsoft.

There's evidence to support both points of view. Clearly Office for Mac can't be too bad for Microsoft, as they retail it and even allow it to carry their brand. On the other hand, Office for Mac is routinely excluded from special offers like The Ultimate Steal. This wouldn't be the case if Microsoft genuinely wanted to maximise the uptake of Office for Mac among Mac users.

My guess? Mac users tend to be more religious about their choice of OS, so their elasticity of substitution between OS X and Windows is near zero. This means they're willing to pay a lot more to get native Windows functionality on their Mac than an "ordinary" consumer might pay for that functionality on a PC (assuming such functionality is desirable to the Mac user. Office is the only example of this which I can think of). Mac users, therefore, have a relatively low price elasticity of demand for any product designed to provide desirable Windows functionality for Mac; Microsoft ought to take advantage of this by charging more for Office for Mac than for Microsoft Office.

However, this may bring accusations of unfair marketing practices, so Microsoft may be hesitant to blatantly price discriminate. Indeed, Office 2008 for Mac and Office Standard 2007 retail for the same price, $400 USD. Instead, Microsoft choose to take advantage of their consumers' preferences through more subtle price discrimination: charging a lower price for shipping Microsoft Office, while Office for Mac ships or downloads for a single price; and excluding Office for Mac from promotions like The Ultimate Steal.