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Technology Stocks : Advanced Micro Devices - Moderated (AMD)
AMD 231.80+1.7%Jan 16 3:59 PM EST
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To: economaniack who wrote (251950)5/19/2008 12:02:48 AM
From: TenchusatsuRead Replies (2) of 275872
 
Economaniack, none of your definitions make any sense whatsoever. Let me just pick-n-choose some of your statements and point out the inaccuracies:

> In the narrowest definition of short term marginal cost, the marginal cost is surely 0.

Marginal cost is NEVER zero by any definition imaginable. Even if you waved a wand and created another unit without any cost in materials, you still have to ship the product, and you still have to pay whoever is waving that wand (unless you somehow get Harry Potter to work for free).

> The marginal cost of a fab's worth of output would include the entire cost of the fab amortized over its lifetime production.

Wrong. No matter how you amortize the cost of the fab, that still represents the FIXED cost.

> AMD is pointing out that in an industry with high fixed costs and low marginal costs, marginal cost pricing is tantamount to selling at a loss, and is profitable only if the firm can price discriminate (sell some product at higher prices) which is the hallmark of monopoly pricing, and which is at the heart of AMDs case against Intel.

If that's the "heart of AMD's case," then the case will fall apart, plain and simple.

Selling at marginal cost is NEVER a sustainable strategy in any industry unless you have zero fixed costs. Hence that point of yours is irrelevant.

AMD's argument goes like this: Intel should sell at prices that allow AMD to recoup both their fixed and marginal costs. In what free market should any business ever price their product based on the COMPETITION'S cost structure?

Like Elmer said, AMD's argument is indeed pathetic.

Tenchusatsu
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