The Economics of Scarcity and Ecosystem Lock-in: NVIDIA's Premium Pricing, Market Power and Consumer Willingness to Pay in the AI Accelerator Market

This study analyzes NVIDIA's high pricing model in the AI chip market by combining the concepts of product differentiation, market power, and consumer behavior. It suggests that NVIDIA has established very high switching costs with the CUDA ecosystem, making the price elasticity of demand very low, if not approaching zero, allowing them to charge a price well above the marginal cost. While this approach is based on using excess profits to invest in technological progress, it has also brought about demand-side issues such as distortions in the allocation of resources resulting from the "computing capacity tax" and consumer surplus reductions due to hardware-and-software bundling. At the industry level, it has exacerbated the excessive concentration of the market and created systemic risks. To address this, this study recommends steps to optimize these measures, like setting up interoperable technical standards, moving towards transparent tiered-pricing regulations, and enhancing the resilience of the supply chain. These measures are designed to maintain a balance between the corporate incentives for innovation, market fairness, and efficiency, and to offer a theoretical reference for the healthy development of the AI industry ecosystem and inclusive growth in the global digital economy.