That's a fundamental misunderstanding of basic economics. The market always sets the price. If the price that is set by the market is lower than the cost to produce that item, then you just don't have a viable product to sell.
The basic real-world reason that renting of digital media exists is because some people are willing to pay more for the added value of being able to watch it over and over while some people aren't.
This is rather devoid of meaning. What is the market if not a label we use to reference the extremely complex interactions of individuals with varying degrees of information and rationality in an adversarial system? Of course the actual price to produce a product influences what people are willing to pay for it! This is why companies fight so hard to keep that information secret. This is why I refuse to buy a typical cell phone plan that charges absurd amounts for data and text and stick to prepaid. I influence the market because of my knowledge of how much it actually costs to send a text. The market absolutely reacts to the actual costs of products.
Not a defence of DRM or overcharging, and more of a statement on how pricing works in real-life.
Very few people have the time and knowledge to do a supply chain or BOM analysis before they buy anything. Hence, there is little incentive for companies to price products based on cost. Cost is a factor only when analyzing profits.
Hence, cost is usually whatever the market is willing to pay. Saying it is unethical or wrong does not change reality.
That's why stronger competition usually makes it more fair, since competitors can lower prices while still being profitable. Overcharging is usually not an indication of "willingness to pay", but an indication that the market in unhealthy (no competition, monopoly and so on).
Agree with you. In general, overcharging does mean the market is not fair.
However, even in the presence of competition, cost is not the major factor in pricing :). Competition may drive prices down but does not eliminate greed.
eg: In India (where I live), mobile services cost a fraction of what it typically costs in US/Canada. Even here, texts are priced at 5x what it costs the operator :(.
That's a fundamental misunderstanding of basic economics. The market always sets the price. If the price that is set by the market is lower than the cost to produce that item, then you just don't have a viable product to sell.
The basic real-world reason that renting of digital media exists is because some people are willing to pay more for the added value of being able to watch it over and over while some people aren't.