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My reading of GPs comment was more about the cause and effect of any corresponding price increase, not whether Netflix would actually increase their price in this scenario.

For a physical good, if you have a surge in demand as more people can afford you're product you start running into supply issues. This will likely result directly in a price increase as you can't increase profit by just selling more when you don't have anymore to sell.

In the example of netflix, the supply issue almost completly disappears. They don't HAVE to increase the price to increase their profit. Yes Netflix may decide that with the flood of new customers they can put the price up and maintain or increase their profit.

The point I think that is being made is that their isn't a physical supply issue in effect "forcing" them to increase the price. They are doing it because they want to, not because they need to.




Sure, there's no "force" to increase the price. But finance and marketing wonks read books like "Pricing and Revenue Optimization", and seeing a big upswell in demand are tempted to do the math again and see what the new maximum profit point is if they have pricing power.


If the marginal cost of a new subscriber is 0 then increasing their costs should only decrease revenue.




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