My intuition is along the lines that if AMD had a competing product earlier, then it would have kept prices down. But since Nvidia has shown what the market will pay, AMD won't be able to resist overcharging. It will probably come down a little, but nowhere near to the point of affordability.
AMD might have to charge less to break into customers that are already bought into Nvidia. There has to be a discount to cover the switching costs + still provide savings (or access).
That's mostly when there isn't a lot of price elasticity of demand. If you're Comcast and Verizon, each customer wants one internet connection and you're not going to change the size of the market much by offering better prices.
If you're AMD and NVIDIA and lowering the price would double the number of customers, you might very well want to do that, unless you're supply constrained -- which has been the issue because they're both bidding against everyone else for limited fab capacity. But that should be temporary.
This is also a market with a network effect. If all your GPUs are $1000 and nobody can afford them then nobody is going to write code for them, and then who wants them? So the winning strategy is actually to make sure that there are kind of okay GPUs available for less than $300 and make sure lots of people have them, then sell very expensive ones that use the same architecture but are faster.
That has been the traditional model, but the lack of production capacity meant that they've only been making the overpriced ones recently. Which isn't actually in their interests once the supply of fab capacity loosens up.
I think you may be mixing demand curve with the supply curve? The supply curve in that case would be 'vertical' at some point. Monopoly prices and and oligopoly pricing do not necessarily want to be at MR=MC. Usually that pricing is where max profit is (closer to MD=MC). That in most cases is never to the right of MR=MC in this style market but to the left of it. It makes sense to make less items and make more money as you are not consuming your profit on support type items or factories.
> This is also a market with a network effect
That is what the demand curve describes. In your hypothetical that would mean the demand curve is more vertical in slope.
Higher prices are more likely due to several items. Participants willing to pay more (crypto and ai). But also less companies making the things than 15 years ago so less supply and oligopoly style pricing. Plus one company being the hinge pin on building the chips and another company consuming large portions of its supply. The supply curve shifted left and up. While the demand curve is going the up and right. There is no 'one thing' that causes it. But oligopoly pricing is very much in effect. With 3 companies making the things.
> Which isn't actually in their interests once the supply of fab capacity loosens up
Which would change the supply curve and they would re-evaluate which way to move the price. That could mean bad things or nothing happens other than possible lower prices (eventually).
Actually there is already a market like this they are in - game. Most Gpu used are low to mid-range see steam. The AI has to and will go down to that level for using or gaming. You cannot just have game for intel … you did. Then steam work hard and realize the steam deck. You can have total different software like j and a did. Hence you really can’t have 1 N to rule for long. Do thank for it and all the fish, without it we might be still doing Gpu for numerical computing research.
AI doesn't have all that much application to gamedev - people think "videogames have lots of AI", and don't realize that "game AI" and "stable diffusion/GPT AI" are about as related as Java and Javascript.
Game "AI" is meant to be fun to play (and win) against, they're not meant to be smart; that's why zombie games are so successful. Most "game AI" are finite state machines, throwing a neural network at the issue would be absurd overkill.
I'm sure there will be some AI applications in games (like procedural world generation or such, perhaps) but it's not the obvious connection that most people think.
Looking at the CPU market, competition did lead to lower prices: AMD are the best, but their CPUs are very reasonably priced because Intel is close behind.
In the gaming market for GPUs, Nvidia has no competition except in some niche areas. Overall, their lead in upscaling software is too commanding so they can price how they want. Customers are paying 15-20% premiums for the same raw hardware performance, all to access Nvidia's DLSS, because there's no good competition.
