Comment by andix

9 days ago

Simple example: Pizza delivery service. The company runs very well, customers are happy, demand increases. At some point the demand gets so high, that they need to buy a second car for deliveries and a second pizza oven.

They look at the numbers and see the risk of making less profit than before, if they expand. Especially if demand decreases at some point, instead of growing further. So they decide to just raise the prices, lower demand and make even more money without additional risk.

6 comments

andix

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rendaw  9 days ago

GP's point is this isn't the 2nd car, this is the 41st car. If they had 1 car it'd be a 2x increase. If they have 40 cars, the only way the 41st car would lead to a 2x increase is if that single car cost as much as 40 other cars.

That's what the post you're responding to was asking.

  • AnthonyMouse  9 days ago

    The real question is whether it's actually just the 41st car or if the demand is such that they'd have to go from 40 cars to 200 and then risk having the demand fall back off after they've already sign on to making 160 more car payments.

    • andix  9 days ago

      For the 41st car they might need to build a new parking deck. Or hire a fleet manager, because the COO can't handle it anymore. They might already run over planned capacity and every new vehicle makes it exponentially worse.

      For bigger orgs the bottlenecks are a bit more vague, but they still exist.