Question

For decades, economic historians analyzed the development of the mid-nineteenth-century American sewing machine industry primarily as a victory of individual inventor genius. However, recent scholarship emphasizes the role of the "Sewing Machine Combination of 1856"—the first major patent pool in the United States. Prior to the Combination, fierce patent litigation among key manufacturers like Singer, Howe, and Wheeler & Wilson stalled manufacturing scalability, as no single firm held all the proprietary rights necessary to produce a functional, non-infringing machine without triggering costly countersuits. To break the impasse, the competing firms pooled their essential patents, establishing a centralized licensing scheme with a standardized royalty fee per machine sold.

Critics of patent pools often argue that such consortiums foster collusion, stifle price competition, and erect barriers to entry for external competitors. Yet, in citing the rapid drop in average sewing machine prices from $100 in 1856 to under$ 20 by 1870, business historian Elena Ramos illustrates that the Combination actually accelerated market expansion and technological diffusion. Rather than suppressing innovation, the shared revenue model incentivized member firms to focus capital on assembly line refinements and marketing rather than legal defensive strategy. Nonetheless, Ramos notes that independent manufacturers operating outside the pool were obliged to pay a prohibitive $15 license fee per unit during the pool's initial years—a detail highlighting that the Combination's pro-competitive benefits were unevenly distributed. Thus, while the patent pool resolved inter-firm gridlock and catalyzed consumer adoption, its structural mechanisms simultaneously consolidated market power among the founding coalition.

Based on the passage, which of the following best describes the functional role of the author's reference to "the rapid drop in average sewing machine prices from $100 in 1856 to under$ 20 by 1870"?