Comment by amy_petrik
3 days ago
>Why would they need to coordinate to keep the price from dropping during a spike in demand?
They wouldn't you're right.
But I would expect for them to follow the sorts of behavior we've observed in other markets - egg prices, gasoline prices. When a spike occurs, even if as brief as a lightning strike, they will only very slowly drop prices, when in a purely capitalistic world the price drop ought to be equally fast - suggestive that the slow drop is a mutual agreed upon collusion. After all, it's in all sellers best interest to game that "consumers temporarily agreeable to scalping prices" as hard as possible, Nash equilibrium or whatever amongst sellers. Many such cases and more vicious and brutal punishments for such behavior would serve to benefit the common man, the final point and benefit of capitalism
>they will only very slowly drop prices
Of course. Price drops only really come through in response to competition.
Long term high prices invite further investment. Investment arrives and wants a quick return. Fastest way to return is to sell above cost but below market. Established players respond. Yada yada. I once met a former projector salesman who was unbelievably angry that someone, I think Acer, came along and destroyed the ~2000 AUD hard price floor that projectors once commanded, which dropped the whole market and his commissions along with it.
Even when collusion is government endorsed instead of outlawed, the same rules apply. See the bromkonvention. You need the new player willing to take the 10% margin to hurt the bottom line of the guy taking 150%.
>when in a purely capitalistic world the price drop ought to be equally fast
No the price can only drop as fast as supply and competition can catch up. For an industry with high input capex costs, thats extremely slowly. I would think some banks would be keen to take a risk on a new RAM fab based on the demands coming from AI, but also I would personally not take the bet that AI will be in this state in 5 years time. So assuming Banks and other lenders are as skeptical as I am, they wouldn't lend, or would request a bigger entity guarantee the loan.
>brutal punishments for such behavior
Brutal punishments for failing to ramp up production? Or for not lowering prices for no reason? I really dont understand
> when in a purely capitalistic world the price drop ought to be equally fast
That is not obvious. When demand is higher than supply, it is clearly good move to raise prices. But when demand is lower than supply it us not clear than lowering prices would raise volumes to compensate for lower margins.