What Is a Decreasing-Cost Industry?
Decreasing-cost industry refers to an industry with a long-term downward-sloping supply curve. Its expansion will cause the average cost to fall. The increase in demand for factors of production caused by the increase in output in this industry has actually reduced the prices of factors of production. The long-term average cost of each manufacturer in a decreasing cost industry decreases as the output of the entire industry increases. This is the external economy in economies of scale.
Declining Cost Industry
- The basic reason for the decline in costs in these industries is
- For such a
- Practical application of decreasing cost industry
- In the knowledge industry with decreasing costs, suboptimal pricing has broad application space. In previous studies, RegerNoll & W. Edward Steinmueller analyzed the decreasing average cost of academic journals. Kingma further pointed out that the average cost curve of books, journals, software, and other printed or electronic information products is sloping downward. In fact, judging from experience, the average cost curve of patents, trademarks, academic conferences and concerts, and even school classroom teaching is also inclined to the lower right. For these knowledge markets, if adhere to the neoclassical marginal cost pricing, it will likely eliminate the knowledge market and cause people's creativity market to shrink. Therefore, all knowledge products must be priced reasonably above their marginal costs. In an analytical study of library copy pricing, Kingma introduced Ramsey pricing. In his view, the Ramsey price "is a series of optimal prices above the marginal cost, which can finance the provision of goods and services." "When the net loss from an increase in the price of a good or service is less than the net gain from the use of additional inputs, economic efficiency improves." Therefore, the actual Ramsey price is for the purpose of recovering fixed fees. What is really to be solved is to allocate the fixed costs (expenses) to the marginal costs of various services at a certain rate (Ramsey value), not the randomness of individual costism. Apportioned so as to be acceptable to each buyer.
- It is worth noting that, in actual work, any typical knowledge pricing is always more complicated than library copy pricing. In order to set the right price for knowledge, people need to distinguish between new knowledge obtained through innovation and ready-made knowledge obtained through replication and dissemination, and understand them as much as possible between the initial cost and the regeneration or additional cost. Because knowledge production has complex fractal production characteristics and local monopoly characteristics under the protection of effective property rights, Ramsey prices reflecting the elasticity of demand prices need to consider the specific conditions of each knowledge itself and the transaction at the time of actual use, which may increase Some Ramsey prices are difficult to implement.