Project Treble

I understand your reasoning just fine, but that was not the original argument. The comment I was replying to unconditionally equated increased longevity with higher profits, arguing that (a) people will always be willing to pay more for a more durable good and (b) they will always be willing to pay *enough* more to offset the loss of volume. Manufacturing costs were completely ignored. Taken to its logical conclusion, this is an argument that every good should be made as durable as physically possible, no matter the cost. Practical evidence suggests otherwise, however, as cheaper, more disposable goods dominate in most areas.

Your argument is much more nuanced, and indeed it is not necessary to double the price in order to break on profits. However, I expect doubling the longevity of the device would add considerably more than 20% to the manufacturing cost; keep in mind that the fixed costs per unit sold (including R&D expenses) have *doubled* simply due to the decrease in volume even before adding in whatever fixed and variable expenses are involved in making the device last longer, plus lower-volume manufacturing is less efficient in general. Also, people may not be willing to pay 50% more up front, even for a device which can reasonably be expected to last twice as long. It's not exactly sound financial behavior, but given a choice between a 2-year device one can afford right now and a 4-year device which would require saving up for a couple more months (or sacrificing other discretionary expenses), plenty of people would choose the former. It's uncommon to find anyone thinking even two years ahead to when the device will need to be replaced; such far-off concerns tend to carry very little weight in the present.

The bigger issue, however, is that you're assuming you can set prices however you wish. The original scenario stipulated a *competitive* market, so you don't have that option; that nice 60% margin you get from selling at 150% of the original price isn't going to last. In a competitive market economic profits tend toward zero (i.e. accounting profits tends toward the marginal rate of return, the least return which makes the investment worthwhile compared to other alternatives) as new competitors see an opportunity and enter the market. Assuming your original 30% margin reflected a competitive market at equilibrium, can you still break even at only (approx.) 20% over the original price? Because that's what your competitors will be charging.