7 ms·

Why does it subtract the marginal cost? According to the formula the more it costs to make the product (per customer/sale cost) the cheaper you should sell it.

• littlestymaar 2y ago
  I assumed they meant “+” (and that's indeed what's in the paper) which is “split the difference between max customer price and marginal cost”, but that doesn't seem particularly insightful nor worth writing a “research paper” for that… (I'm always baffled how low the bar is for submission in econ journals). B basically any economic reasoning around “demand curve” and “marginal cost” is meaningless in real world situations.
  • apwheele 2y ago
    Yes it should be a "+", thank you. Just because marginal cost for software can be close to zero in some circumstances does not make demand curves meaningless!
    • littlestymaar 2y ago
      Demand curve is meaningless because humans don't have a stable and rational assessment of the price they would accept to pay for something (that's why having pretty hostess and expensive packaging are a thing) and this price also depends on many contextual factors: you're OK to pay much for for a glass of Coke in a fancy restaurant that you would accept at Mc Donalds, and a business values a piece of B2B software very differently depending on at which point we are in the fiscal year. The so-called demand curve is as useful for a business as a population-wide heartbeat distribution would be. It makes no sense to talk about “the” curve, since it changes all the time!