

You don’t profit in a monopoly, you work harder: A lesson from Apple - paramaggarwal
http://paramaggarwal.com/post/6004326725/you-dont-profit-in-a-monopoly-you-work-harder-a

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wccrawford
"Every high school pass out knows this equation. To maximize profit, you can
either maximize the profit per device sold or you can maximize the number of
devices sold. Profit has the tendency to stay constant. If you reduce the
profit per device, the number of devices sold will increase."

What? NO! You maximize profit by finding out where supply and demand meet to
find the point where profit and units sold turn out the maximum profit.

And the rest of the article has little to do with maximizing profit and every
thing to do with gaining market share.

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paramaggarwal
I was trying to point out the balancing act between profit and quantity in my
article. But your point is perfect. I missed it. Thanks.

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snikolic
Premise: Traditional economics is pricing things low when entering a market,
and pricing things high in a captured market (a monopoly).

Argument: Apple does the opposite of this. e.g. Apple entered a new market
with the iPhone, but priced high. Apple had a tablet monopoly with the iPad,
but priced low.

Conclusion: Worship Steve Jobs as he upsets traditional economics.

Fallacy #1: The iPhone was not an entrance to a new market; PDAs, mp3 players,
handheld internet, and cell phones had already began to converge into a single
market, and Apple had already forayed in those markets. The iPhone was simply
a premium and unique device in that market, and thus able to fetch a high
price.

Fallacy #2: The iPad was not a monopoly. It was an entrance to a new market -
particularly one that did not exist yet...tablets.

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paramaggarwal
Your analysis of my article is brilliant. Thanks a lot. I hadn't realized how
flawed my analysis was.

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snikolic
Sorry my post was sort of condescending/snarky. Your article was good food for
thought.

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kenjackson
Bad article. Gets a lot of stuff wrong or omits key facts, such as Apple's
almost immediate huge price reduction on the iPhone. Or the subsidy model used
on ATT. Without taking these things into effect, you can't do a reasonable
analysis of what Apple did.

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pohl
_In 2010, Apple launched the iPad. There was nothing like it in the market. It
was an instant success. A monopoly in the true sense of the word._

Translation: not at all a monopoly in any legally meaningful way.

Horrible article.

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paramaggarwal
You are right. I got the meaning of monopoly horribly wrong in my article.

