But you cant compare the price point with what it used to cost and imagine that its overpriced now and that people will seek alternatives. There aren't any cheaper alternatives.
This has played out time and time again during every other supply-side shock. Once prices go up, they don't come back down.
For the current DRAM situation, I can almost promise we'll never see $60-$90 RAM again. Maybe, 32GB won't cost you $500 eventually, but it'll cost you $250-$350 instead of $500. If the market can bear it, why would anyone get into a price war that's just a race to the bottom where no one wins?
That doesn't disprove my point though. Prices are still higher as a baseline than before the supply side shock. Prices raise to a "new normal" and consumers adapt, removing pressure to lower back down to pre-shock levels.
wholesale egg prices have actually plummeted, yet retail prices have only drifted slowly downward incrementally, and have not reached the previous baseline. Its asymmetric price transmission, and its a documented economic phenomenon. "Prices go up like rockets, and fall like feathers"
Suppose you have a warehouse full of widgets. You bought them them for $450 each, and sell them for $500. You're really happy with this profit, and you can just keep selling them at $500...forever, right?
But then, I get my own warehouse and fill it with widgets that I bought at $400 each because I entered under better market conditions. And I really want to sell these widgets -- they aren't making me any money when they just sit there taking up space and burning rent.
So I price these widgets at $475, to attract customers. It works; the widgets are flying off the shelves. And they're being purchased by people who used to be your customers, and I'm making even more money per-unit than you are.
What's your next move? Do you want to keep losing customers to me, or do you want to adjust your price to be more competitive?
A new entrant isn't guaranteed to now price at $475. They'll see the incumbent being successful at $500. Now they price at $499 rather than trigger a destructive price war. Companies collude on this quite frequently. When everyone keeps their prices high, all get to enjoy the big margins.
Outside of that, ok so you have a warehouse full of widgets you need to move fast. So you undercut, and sell out. If demand is still bigger than your supply, you're now out of capacity, customers are going back to buying for $500 from your competitor. That means you've mispriced your limited inventory, so now you raise your prices up to closer to $500 because it helps you control your capacity, and also you know the market can clearly bear it.
Anyway, those are obviously overly simplified scenarios prices rarely fall down dramatically because of tacit collusion. Its asymmetric price transmission ("Prices go up like rockets, but fall like feathers")
Retailers are mostly free to offer things at whatever prices they want. But the market has more power than you may think to correct it.
Prices will continue to go up.
Though that’s kind of cheating considering it’s basically a monopoly at this point
If that bubble pops like it seems to be threatening to do memory prices could drop back to their old levels give or take some sticky inflation.
Can you explain this chart?
https://ourworldindata.org/grapher/historical-cost-of-comput...
