> Price of goods, especially digital goods, aren't based the cost of those goods. The price of something is instead based exclusively on willingness to pay for

> Price of goods, especially digital goods, aren't based the cost of those goods. The price of something is instead based exclusively on willingness to pay for it. There is a lot of misconception surrounding this principle. To oversimplify, in the short term, price is determined by the interactions of supply and willingness to pay. However, in the long term (in a competitive market), new suppliers will enter the market if existing suppliers are making supernormal profits, and existing suppliers will exit if they are making subnormal profits. This means that, in the long run, price will converge to the average total cost of production, in a competitive market. Of course, Netflix is not operating in a perfectly competitive market, but that distorts the price in a different way. It's not quite technically correct to say that price is based exclusively on willingness to pay for it; even in noncompetitive markets (true monopolies, as opposed to monopolistic competition), one can just as easily say that price is determined by the quantity that the monopolist wishes to sell.