Some aspects of the conjecture make sense and are observable:

Consider e.g. Steam (digital video games): Prices are discounted over time because of "greed" (=> desire to sell the same product to customers that value it less than the first wave).

Customers do adapt to this, and expect future discounts (sales) at release date already, and defer their purchase accordingly (despite valueing it higher!).

But in reality, customers are not 100% rational, don't have perfect information (on seller strategy), and the product value (to buyers) changes over time too (typically mostly downward), so the base assumptions are difficult to find in reality.

It's one of those "imagine a frictionless, perfectly spherical pig in a vacuum" theories that don't survive contact with reality.

Buyers don't just pop up on timestamp zero and remain unchanged. They anticipate price changes, potential new buyers come in, the market is dynamic.

I also don't understand why this only affects monopolies. The same logic should dictate that all products and services fall towards MC?

The conjecture assumes durable goods, so it doesn't apply to medicine. Also no resale, so that narrows the scope even more.

The gist of the conjecture is that if the customers can wait out for price drops and the monopolist wants to sell their thing, then after a few rounds of "he knows that we know that..." the price ends up to be the marginal cost.

Now, real world disagrees with the model, so next steps are to examine why this happens and maybe discover some new economic interaction.

You're not the first person with... an opinion on economic "science".

Paul Krugman: https://www.princeton.edu/~pkrugman/interstellar.pdf

"This paper, then, is a serious analysis of a ridiculous subject, which is of course the opposite of what is usual in economics."

A common misunderstanding, this. Economists in theory don’t focus on starting with the right set of assumptions, like any gentleman they instead focus on starting with the right set of conclusions. They then, in theory, argue passive-aggressively over why their model is The Right One using increasingly obtuse game theoretic models, usually with a drawing of two lines intersecting. The rest of the world? We simply shrug and ignore them.

Much like the the people ignored the idiot savants tucked away in medieval monasteries. At some point they become useful, like when the king needs to know what the nature of God is, who It approves and why it’s him and not the other guy.

Now that we've traded our warrior nobility for economic nobility, the neurodivergent and mildly touched ones are tucked away in academia instead. Pleasantly seperated from their subject of study. To figure out the nature of "The Market", and why it is, in theory, as Rational and Self Organizing as a medieval Thomist Universe.

And we are like the medieval peasantry who cannot understand an iota of what they're scribbling in their intimidating books. But we can see they're still fighting over It, just like they fought over resolving the philosophic contradictions of the faith.

It makes one wonder: what shape and mission will They have next? Will it be in explaining the actions of some sentient supercomputer, which both feeds and spanks us? Or which irradiated plants will take us beyond the Seventh Sphere, in theory? More at eight.

My read was that MC = "market clearing price" not "marginal cost".

Being a bit more humble, perhaps the lesson is that the difference between the theory and reality highlights externalities that always exist in the real world that make the theoretical model miss a crucial piece of the real world. It's logically correct in some sense, but incomplete.

Kind of. The whole setup is pretty improbable.

There is durable good which means that consumers will only buy once (pharma doesn't seem to fit here).

And there is the monopolist. So there shouldn't be any outside options, as the last paragraph claims in the OP.

And the marginal costs seem to be constant. Which is only the case for things like data or software. For most goods, however, one needs to invest in production facilities to increase output for a bigger number of goods. In this case the marginal costs will increase as well and so it would make sense to first sell a lower number of goods for a higher price.

Somehow, it doesn't quite add up for me, but I can't quite put my finger on what it is. It reminds me of the unexpected hanging paradox.

Somewhat that is it.

The issue if, of course, that marginal revolution overstates the contribution of a single empirical study here.

Of course everyone is aware that the original model doesn't hold in reality. The contribution of showing this in the ebook market is... not zero, but certainly not the implied "We killed the theory!!!!"

Instead, there are decades of papers poking holes in the Coase model and producing ideas as to why the conjecture doesn't hold. In my mind, these are the more interesting contributions. The authors mention two, but I think far more tangible are time preferences, time horizon limits, pertubations, non-uniform prior assumptions and bounded rationality.

"I don't know who any of these people are, or what the theory is, but it's obviously wrong."

- Classic HN commentor

As far as I can tell that is indeed, "it". What is maybe more interesting is that it took this long to find data that shows it wrong given we have so many examples in history of it being in fact wrong.