What is the Real Cost of Software?

ThePromenader writes: The software world has much evolved since Windows 1.0 and the free software movement (1984 and 1983 respectively). Proprietary software and 'open source' software each have their own quite distinct market strategy, yet both are still operating successfully today. My questions are these: If one proprietary software carries a steep price, and the other software, developed under a transparent development scheme, is 'free', what could explain the success and/or failures of each model? Why should a software carry a steep price, and what justifications could there be for this price? On the other hand, why and how should/can a software be 'free'? Lastly, does anyone have any ideas about what an 'ideal' software development/marketing strategy should be?