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As sibling comments have pointed out, you don't necessarily have to flood the market; but there are price regimes where it would make economic sense to do so.
by theptip 8y ago
As sibling comments have pointed out, you don't necessarily have to flood the market; but there are price regimes where it would make economic sense to do so.
Suppose it costs a terrestrial mining company $1000/ton to extract a material, and the price is $1005/ton, and you can bring the same metal down from space for $100/ton, and sell at $110/ton. Under this set of facts you can make a better margin than the terrestrial miners make, take over the whole market, and everybody except the terrestrial miners will be better off.
Your only competitors would be other space miners, and the capex/research investment required to set up a space mining operation would constitute a significant moat (though certainly not a permanent one).
Who knows if these hypotheticals are remotely close to how this will play out, but I think this is an interesting scenario.
- xbmcuser 8y agoWhy the hell would you sell it for $100 when your nearest competitor cost is at a $1000. You would sell it for $990 and keep lowering the price slowly as you are able to satisfy demand at each price point.
- theptip 8y agoYes, there are strategies around how to optimally milk the period of price change. I was talking about the equilibrium state here. The point I was making was that even if you cause a price drop by flooding the market, it might not be a bad outcome; you could end up making more profit than was being made by your competitors before you entered the market. To your point, it's true that even if the equilibrium state isn't more profitable for an actor, they would still be incentivized to increase the supply if they could temporarily widen their profit margins while the price is changing (e.g. until the competitors can catch up). But I think that the equilibrium state provides a simpler working example of the general point I was making.