Comment by AnthonyMouse

Comment by AnthonyMouse 2 months ago

1 reply

> The point is that there’s nothing magical about price discovery under an anti-competitive system.

There is though, because it gives you the price that it's worth to the buyers, which is the amount of benefit the buyers derive from it existing, which is the amount of incentive we want to provide to create it.

For something that wouldn't otherwise exist, the monopoly price for a temporary period of time is a close approximation to what would maximize welfare -- it's proportional to the value of having it exist without being the whole thing, because it becomes a competitive commodity when the patent expires.

yunwal 2 months ago

> There is though, because it gives you the price that it's worth to the buyers

It does not. It gives you what it’s worth to the last buyer, sure. All of the buyers before that value it higher than that price, and all of the people that don’t buy it value it lower than that price. In the end, all you’ve really found is the price the company expects will maximize profit.

This may tell you a little bit about what the company believes the demand function is, but it doesn’t confirm or deny their correctness.