Technology advancements have high fixed costs, the recovery of which require high initial prices. The rich are early adopters and pay for the privilege, thus underwriting the development costs. As the marginal costs are typically low, economies of scale kick in and average costs approach the low marginal costs. Note that there is a time element to the whole story. First, it takes a bit of time for the high fixed cost of development to be recovered. Second, as time goes by, there is “learning by doing.� Firms figure out how to do things more efficiently. Average costs come down further. Finally, marketplace competition forces prices to reflect low average costs.
In an excellent post, Atanu argues that to help the poor, investments must be made in technologies which (initially)Â benefit only the rich.
Hat Tip-Bong’o'Pondit
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