Xref: utzoo comp.arch:19065 sci.econ:2013
Path: utzoo!utgpu!news-server.csri.toronto.edu!cs.utexas.edu!sdd.hp.com!ucsd!ogicse!pdxgate!eecs!chedley
From: chedley@eecs.cs.pdx.edu (Chedley A. Aouriri)
Newsgroups: comp.arch,sci.econ
Subject: Re: Intel bugs / bugged by Intel :-(
Summary: Pricing of the 386
Keywords: Monopolist, profit, cost, revenue, price, 386
Message-ID: <595@pdxgate.UUCP>
Date: 8 Nov 90 05:10:53 GMT
References: <35325@cup.portal.com> <1990Oct30.210852.15087@mozart.amd.com> <8527@scolex.sco.COM> <1990Nov7.184237.22840@mozart.amd.com>
Sender: news@pdxgate.UUCP
Reply-To: chedley@eecs.UUCP (Chedley A. Aouriri)
Organization: Portland State University, Portland, OR
Lines: 41

In article <1990Nov7.184237.22840@mozart.amd.com> brett@cayman.amd.com (Brett Stewart) writes:
...
>   2.)  Someone can argue that 386 pricing is near the level where
>	it would be had not Intel breached, per 1. above.  I think
>	this will be tough.  The 386 is about 70K square mils.  The
>	29000 is about 175K square mils.  Silicon, folks, is
>	silicon, and the 29000 perversely costs a lot less than a
>	386.  The costs to make them go as die size, and that's just
>	how it is.

However, you are NOT including the R&D costs incured by INTEL for the 386.
While it is true that silicon is silicon, the logic/microcode which goes into
that silicon is an essential added value. And the cost to develop that logic 
is by no means nil!!!
So, regardless of the contractual legalities, INTEL does have a point in 
refusing to share the spoils of its R&D outlays and risks with another 
company who did not contribute a dime to the R&D costs of the 386.

Following your logic, a Boeing-747 should cost only a few thousands dollars.
Metal is metal, is n't it!!!???
Or are you advocating that Boeing should give free licence to any manufacturer
who wants to build the 747, even if it did not contribute to the R&D cost of
the airplane ???

>....
>	greater volume.  A monopolist cannot charge any price;
>	eventually some consumers balk.  What a monopolist does is
>	pick the price point it wants and then sell what it can at
>	that price.

No! a monopolist tries to maximize its profit or revenue, regardless
of the price or the demand for its product. A monopolist is NOT a
price taker or a price picker. It sells at any price and any quantities which 
maximize its profit. So, the monopolist sells quatitities at the price 
solution to the equation:   marginal revenue = marginal cost.

And that's exactly what INTEL is doing. It is maximizing its 
profit and return on investment in the 386, by selling as many 
386's as it can manufacture, at the highest price it can get.

..CHEDLEY..