Pricing Power

See: Inelastic Demand Curve. See: Elastic Demand Curve.

When you have a lot of pricing power, it means that you can raise prices with impunity, or rather, with almost no diminution in sales volumes.

The ultimate example? Microsoft back in the day, with its Windows operating system. If you didn’t have Windows, your computer...didn’t work. And if it didn’t, then your office didn’t work. You couldn’t really bill. You couldn’t track. You couldn’t model. You couldn’t do much of anything other than stare at an abacus, scribble with a pencil, and count with your socks off.

So Windows raised prices from about 80 bucks a unit when it started to truly dominate, and with virtually no extra (useful) features, it gradually over the course of about 5 years raised prices to live closer to $200 a unit. Huge margin expansion. Huge dominance. Huge monopolistic pricing power above and beyond anything the world had previously seen.

And then Bill cured malaria, so all's good.