The best long term advantage is being the lowest cost producer....

The best long term advantage is being the lowest cost producer. Maintaining high prices incentivises entrants into the market (in this case, more money spent on R&D). If you can save your customers a couple of dollars, offer a better product and still turn a profit, why not?

Yes, typically those with strong IP just inflate their prices. But this is not a very good long term strategy.
Just because it's taught in an economics class, it doesn't make it so.

Also, I highly doubt Lev would raise capital to keep increasing capacity unless he really had to. His track record speaks for itself - something well with investigating.