system
Given the following post, respond as if you're commenting on Reddit:
human
A Question about Supply and Demand, and the video game industry

Okay, so if i got that right, If supply increases, but the market's size stays the same, prices are supposed to go down. If someone undercuts your prices, You should experience a drop in demand for what you sell, and a Drop in demand means drop in prices.

Here is the question: Due to how digital stuff works, online piracy of video games basically creates *INFINITE* supply, for a selling cost of *ZERO.* Absolute. Nothing. 

So if the video game industry exists in a market, where there is Infinite supply of what they sell, with their prices undercut to the highest possible degree...

Why are video games still so expensive? How didn't the entire industry implode in to nothingness due to an ecnomonical collapse of the market for video games?
gpt
You are making a significant assumption - pirated video games are freely available for everyone. 

If pirated games were freely available, the prices of games would substantially decline (it won't ever be zero because no producers will be willing to develop video games for earning nothing and would lead to an exit of developers from the video game industry). However, pirated games aren't freely available and requires a fair amount of expertise (use a torrent, subvert anti-piracy laws etc.), that everyone doesn't have, to get these freely available games. 

So, video games are expensive because a certain section of the population (it's millions of people) would continue to purchase these games because they cannot obtain/want to use pirated copies. Do pirated copies affect prices of games? Yes, it does as game developers are forced to raise prices to cover probable possess due to piracy.

In economic terms, game piracy leads to private welfare but negative externalities (higher prices, reduced developer interest, potential exit of weaker firms). In the long run, everyone would end up worse off due to negative externalities.