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Comment by projectramo | Hacker News Reader

It seems you are much smarter than the rest of us when it comes to understanding supply and demand curves, but why don't you help us walk through an example, okay?

Suppose it costs -- and I am making this up -- $10 to produce the first 1000 units, but only $1 after that.

Suppose people are charging a lot of money, say $50 for a unit.

Won't you increase production to try to capture that demand.

After that, because you have increased production you enjoy economies of scale, and the price comes down.

If you are the only producer, you have no incentive to come down, but if there are other producers you will want to undercut them. In this case, you will bring down your price to gain more market share.

Please help us understand what we are missing with your shrewd understanding of supply and demand curves.

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Because supply and demand curves aren't smooth - Increasing production scales linearly up to a point, and then you need to build a new factory. Samsung is pumping out all the SSDs it can produce. It is probably also building new factories, but the capital investment and lead-time on that are significant, and until those factories come online, they're simply sunk cost.

Customer demand is not smooth. I will buy precisely 0 SSDs at prices > $125 per 1T drive, and I will suddenly buy 4 as soon as the price drops below there. There are thousands to millions of other customers will scattered plot points around that area, but while you can draw a smoothed graph over them and be reasonably correct, they do not actually represent a mathematical law.

Further - Information is imperfect and markets, for all their elasticity, are only trending towards efficiency.

This all assumes you're arguing in good faith. This in itself is an unreasonable assumption - Your last, mocking line seems to belie it. As does this line.

Nothing in the argument I laid out has anything to do with smooth curves. The same arguments apply for lumpy or unsmooth curves.

OP was talking about 10 year lags! Please read the whole thread in context.

NAND prices have dropped considerably over the last 10 years, but not as fast as hard drive prices.

https://static.seekingalpha.com/uploads/2017/9/24/9577541-15...

Increasing production of semiconductors means bringing up a new fab. It's incredibly expensive and takes years.

Samsung et al do build new fabs, but at a significant lag to demand for logistic and risk-mitigation reasons.

It seems that you assume that if one producer sells its product for slightly less than its competition, then it will get all the customers, à la Bertrand competition.

But if it is not the case, and lowering your price only wins you _some_ but not all customers, then there is no reason to expect that the price point that balance gaining new customers vs selling each product for less will be equal to the marginal cost and not above.

That the growth of demand is outpacing the growth of supply. I thought he was fairly clear about that.

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