Artificial scarcity

The most common causes are monopoly pricing structures, such as those enabled by laws that restrict competition or by high fixed costs in a particular marketplace.

This strategy of restricting production by firms in order to obtain profits in a capitalist system or mixed economy is known as creating artificial scarcity.

Artificial scarcity essentially describes situations where the producers or owners of a good restrict its availability to others beyond what is strictly necessary.

[3] Robust competition among suppliers tends to bring the consumer price close to the marginal cost of production, plus a profit that makes entering the market worthwhile compared to other opportunities.

Lack of supply competition can arise in many different ways: Some products (e.g. works of art, non-fungible tokens, expensive cars) are manufactured as one-of-a-kind or in a limited edition, and can extract a monopoly price.

For example, there is only one original Mona Lisa, which is very expensive, even though the work is out of copyright so that copies and reproductions are available at low cost.

A luxury supercar might be manufactured in artificially low quantities to take advantage of the reputation of the brand and the difficulty other suppliers have in replicating the design, even if not protected by intellectual property rights.

Non-manufacturers can create artificial scarcity and extract monopoly prices (at least temporarily) by hoarding or cornering the market on a particular commodity.

After a time of profiting from legally enforced artificial scarcity, the patent expires, and other companies can make generic versions, and compete on price in a free market.