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9eB1 comments on What resources have increasing marginal utility? - Less Wrong Discussion

36 Post author: Qiaochu_Yuan 14 June 2014 03:43AM

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Comment author: 9eB1 14 June 2014 04:51:30PM 0 points [-]

But a monopoly wanting all of something isn't the same as increasing marginal utility, it just means that marginal utility is always positive. For increasing marginal utility it has to be the case that each unit increases the value of the monopoly more than the last unit. Once a network has become large enough, you can ignore the existing network for the purposes of comparing the marginal utility of additional nodes in it. For monopolies that aren't based on network effects but pricing power, you get most of the pricing power at market shares significantly less than 100%. So there is some market share increment where you get the benefits of monopoly pricing with your normal cost structure, and the next market share increments don't allow you to increase your prices but still have your cost structure in place, ergo they have a marginal utility less than the monopolizing increment.