Editing Artificial scarcity (section)

== Causes of artificial scarcity ==

Robust competition among suppliers tends to bring the consumer price close to the [[marginal cost|marginal]] [[cost of production]], plus a profit that makes entering the market worthwhile compared to other opportunities. Circumstances with insufficient competition can lead to suppliers exercising enough [[market power]] to constrict supply. The clearest example is a [[monopoly]], where a single producer has complete control over supply and can extract a [[monopoly price]]. An [[oligopoly]] - a small number of producers - can also sustain an undersupply if no producers attempt to gain market share with lower prices at higher volume.
 
Lack of supply competition can arise in many different ways:
* [[Cartel]] - a group of suppliers explicitly agree to constrain supply. This is usually illegal under national [[competition law]], but some cartels are government-approved.
* [[Barriers to entry]] make it difficult for new producers to enter the market. These may be inherent to the business (such as the cost of building a new factory), related to government regulation, or intentionally created (sometimes illegally) by incumbent suppliers to reduce competition
* Producers uninterested in the market due to low expected profit margins compared to other opportunities
* Monopolies created in law to encourage innovation and make certain businesses worthwhile
** [[Copyright]], when used to disallow copying or disallow access to sources. [[Proprietary software]] is an example. [[Copyleft]] software is a counterexample where copyleft advocates use copyright licenses to ''guarantee'' the right to copy, access, view, and change the [[source code]], and allow others to do the same to derivatives of that code.<ref>{{cite web|url=https://www.gnu.org/copyleft/ |title=What is Copyleft? |publisher=Free Software Foundation, Inc. |accessdate=2022-09-28}}</ref> Producers use various means to self-enforce payment and make [[copyright infringement]] difficult, including controlling physical access to copies, [[copy protection]] and [[digital rights management]] technology, [[paywall]]s,<ref>{{cite journal|last1=Sullivan|first1=John L.|title=Software and Artificial Scarcity in Digital Media|url=http://polecom.org/index.php/polecom/article/view/64|journal=The Political Economy of Communication|access-date=3 May 2017|language=en|date=20 June 2016|volume=4|issue=1}}</ref> and disruption of illegal marketplaces (e.g. [[cease-and-desist]] letters, [[torrent poisoning]]).
** [[Patent]]s for useful things

Some products (e.g. works of art, [[non-fungible token]]s, expensive cars) are manufactured as one-of-a-kind or in a [[limited edition]], and can extract a monopoly price. This succeeds only to the degree that substitutions are unavailable or less desirable or the identity of the producer is considered important. 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 (economics)|hoarding]] or [[cornering the market]] on a particular commodity.

Governments use various types of [[price support]]s that create artificial scarcity, including payments for non-production, government purchasing at a guaranteed price, and even deliberate destruction. This is typically done in agricultural markets to aid farmers. Examples:
* The 1933 [[Agricultural Adjustment Act]] in the United States during the [[Great Depression]]
* Destruction of coffee by the Brazil National Coffee Council<ref>{{cite web |title=Brazil: Destroy! Destroy! |url=http://content.time.com/time/magazine/article/0,9171,789298,00.html |magazine=[[Time (magazine)|Time]]|access-date=17 August 2021 |archive-url=https://web.archive.org/web/20200225132330/http://content.time.com/time/magazine/article/0,9171,789298,00.html |archive-date=25 February 2020 |date=6 June 1932 |quote=Ruthlessly resolved to force coffee prices up, Brazil's National Coffee Council continues to burn coffee}}</ref><ref>{{cite web |title=$30,000,000 of Coffee Destroyed by Brazil In Year Under a Price-Stabilization Plan |url=https://www.nytimes.com/1932/06/12/archives/30000000-of-coffee-destroyed-by-brazil-in-year-under-a.html |work=[[The New York Times]] |access-date=17 August 2021 |archive-url=https://web.archive.org/web/20210817145858/https://www.nytimes.com/1932/06/12/archives/30000000-of-coffee-destroyed-by-brazil-in-year-under-a.html |archive-date=17 August 2021 |date=12 June 1932 |quote=Brazil's program of destruction of coffee to support the price of that commodity}}</ref>
* Conversion by the French government of wine into industrial [[ethanol]], related to the idea of a [[wine lake]]
* European Union guaranteed purchases of certain agricultural commodities falling below [[intervention prices]], resulting in occasional [[butter mountain]]s
* U.S. government [[Commodity Credit Corporation]] purchases of dairy products from WWII to the 1990s, resulting in [[government cheese]]
* Agricultural [[production quota]]s, where overproduction can result in a fine
* [[Import quota]]s
Restrictions on [[immigration]] artificially reduce the supply of [[Wage labour|labor]].