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To: Steve Robinett who wrote (45589)	5/4/1999 10:26:00 AM
From: DavidG	Read Replies (1) \| Respond to of 53903

Steve, Gee, Does this mean that MU will not go to 40???:-) DavidG

To: Steve Robinett who wrote (45589)	5/4/1999 12:05:00 PM
From: Carl R.	Read Replies (1) \| Respond to of 53903

Steve, I agree that it is not a perpetual zero sum game because eventually some people drop out. Also external factors can bring it to an end. For example an epoxy plant could blow up. Or a new Windows could come out that dramatically increased the demand for memory. If all the producers did enter into a conspiratorial agreement and quit buying equipment the steady increase in demand would result in rising prices and profits for all. But of course the availability of equipment that could reduce costs would cause some to cheat and increase production in order to make even more, which would cause the conspiracy to fall apart, just as OPEC eventually fell apart. Your mistake is that you assume prices would continue to fall even with no increases in production. As I said, in the absence of a conspiracy, each producer must order more equipment to decrease costs, because prices continue to fall. But the process of decreasing costs results in more supply, leading to further price reductions, and so on. If a single DRAM maker elects not to buy new equipment, they are doomed. Thus they all must decrease costs. Therefore I stand by my comparison to prisoner's dilemma. But now we are in the end game. Producers who are not at .21-.23µ can't possibly compete, so marginal producers should soon begin to drop out. We should also start to see some production slowdowns soon, as the high cost producers reveal themselves. Carl