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If Nvidia is smart, costs have nothing to do with prices except as a lower bound.
by matt4077 9y ago
If Nvidia is smart, costs have nothing to do with prices except as a lower bound.
- DavidSJ 9y agoLet Q(p) be quantity demanded at price p, and c be marginal cost. Then profit is Q(p)*(p-c). If e.g. Q(p) = 1/p^2 (price elasticity of demand of -2), then profit is 1/p - c/p^2, which is maximized at p = 2c. Note how optimal price depends on cost.