partial_accumen , 1 year ago

What they fail to take into account is that the people left are going to be way less happy with the service, and actively looking for replacements.

That’s built right into the Elasticity of Demand. The economic term phrase is search for substitution.

"When you examine the relationship between the demand schedules of substitute products, if the price of a product goes up the demand for a substitute will tend to increase. This is because people will prefer to lower-cost substitute to the higher cost one. If, for example, the price of coffee increases, the demand for tea may also increase as consumers switch from coffee to tea to maintain their budgets. "

What this means is they can actively calculate the number of subscribers they will lose when they increase the price of the product. They can also calculate the amount of more money they’ll get with higher subscriber fees. They compare the two numbers and choose the one that makes them the most money.