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Why don't people realize that 'high software profit margins' are fugazi?

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This is an important aspect of economics that lots of people seem to misunderstand: prices are not determined by costs.

They’re determined by what consumers are willing to pay for your product. That’s it.

The manufacturer sets its price based on what will bring them the most profit, I.e. what the consumers are willing to pay times the number of customers willing to pay it. Notice how cost is a pretty minor factor in that.

Supply and demand has an effect because it reduces the amount consumers are willing to pay (because they can get your product elsewhere)

So your argument that software should charge less based on what it costs them is just a misapprehension of how this works in the economy in general.

But once the business stabilizes, if they are making more than 20%, the executives all get.. executed.

The proper way to solve this is to eliminate blockades to proper competition and to allow other to start competing business.

Not to execute successful people. For start it would hit scary/niche businesses.