Unfair prices: a brief lesson in supply and demand

Want to design the book cover for Tim Ferriss's new book? If you win, hope you're happy with a mere $250 first prize:
Best case scenario, you get $250, your cover on a huge international bestseller (awesome for a major portfolio jump), full cover credit, and all the perks that come with massive recognition. Worst case scenario, you give it a shot, have something new for your portfolio, but don’t get recognition or money.
Needless to say, this sparked a huge amount of protest in the comments. Ferriss responds:
For those who think I’m a jerk for offering the above, please feel free to protest by not submitting. Feel free to call me names, too. I find “sweetcakes” particularly offensive.
And again:
To the commenters who insist I’m exploiting the entire design community, I’d like to point out that, if you don’t participate by submitting, it is impossible for me to exploit you.
If a buyer makes a scandalously low offer, there's nothing unfair or exploitative about it: respond by declining the offer. In this case, lots of people want to submit bids, and there isn't that much to differentiate between entrants. If you can't find a higher offer, the odds are that the service you're providing isn't that valuable. It's not so much mean as it is a recognition of what services are worth. The argument is similar for high prices: if a gas station has unfairly high prices, go to a different gas station, or decline to buy gas. If every gas station has the same price, odds are that the price reflects the cost of extracting the gas from the ground and transporting it thousands of miles to its suburban destination. Very quickly, this principle works well for about 999 of 1000 prices, transactions, and contract offers. Some markets have fundamental problems, or take a while to find equilibrium prices, like the healthcare market. Unfortunately these market failures are the ones that get publicized

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