"Jay Honeck" writes:

The surviving company will usually optimize the product price to
maximize total profit. Many times, the optimal total profit is
achieved with a lower product price generating significantly
increased volume.

And how is this determined, if there is no other show in town to
compete against? Answer: By setting it at whatever the (formerly)
rich pilot will pay. If there is no UPSAT to field a competing
product, what possible incentive will Garmin have to lower the
price?

They'll set the price wherever it fits best on the supply/demand
curve:

http://www.wikipedia.org/wiki/Supply_and_demand

Assume (for a new model) a that Garmin has a fixed overhead of $10M
(for certification, equipment, plant, etc.), and variable costs of
$500/unit -- would Garmin rather wholesale 1,000 units at $10,000, or
3,000 units at $5,000?

Before the StrikeFinder came out, for example, BFG still couldn't
charge $25K for a StormScope, even without any competition in the
range. Competition does help, of course, but it's not the only thing
that controls prices.

No, less competition in the avionics world is going to hurt us all,
I'm afraid.

That may well be true, but this might also be an incentive for someone
else to enter the market -- maybe some UPSAT employees will leave to
form their own startup, the way the Garmin guys left Bendix-King.

To take another example, you have the only hotel at your airport --
what keeps you from raising the rates to, say, $500/night?


All the best,


David