Simple thought experiment for the day: does it make sense for Apple to purposely keep it’s prices high?

Yes, of course, they want to maximize the revenue on their products to make the most profit, but that’s not what I’m talking about.

I’m talking about the fact that the more economies of scale they achieve, the more they will be able to offer price-competitive products, and if they did lower their prices, then they could achieve greater market share gains.

But the name of Apple’s game is integration and tie-in. iLife and OSX. Macs and their various accessories. Point is, if they get too much market share, they could venture into monopoly-land like MS. Increase scrutiny at minimum, and at worse, forced changes to their products. That’s a huge risk, and you can probably put a number on that.

There’s a function here. Something like profit P(price) = Volume(price) * Profit(price) – MonopolyCost(MarketShare(price)). And I bet it looks like a hump. At really high price point the MonopolyCost component is low, but Volume is also low so total profit is low. You bring the price down and the Volume*Profit increases rapidly while the cost part stays low. Bring the cost too low, and MonopolyCost (which is really just a risk measurement) gets bigger so the curve comes down again. So you’d want to pick the top of the hump of the curve.

I wonder if Apple thinks of things this way.

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