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Unit II C and D Student Thought Forum
Instructions: This is a place for you to express you opinions and idea about topics from class. In the space below, write freely about the issues we are learning in the current unit. Begin your entries with: "(Your name) says:"
Create a category for your thoughts, type the category in RED. Choose one of the categories, read and contribute to the discussion, OR create a new category of a topic that interests you.
Monopolies:
Christina Hu says:
Hey guys, can anybody think of an example of a perfect monopoly or anything close to one? I'm starting to think there are none at all anymore, but maybe it's just because my brain is not functioning properly at present.
Andy Xu: I think this will depend on how you define the industry in which the firm is in. For example: the Shanghai Metro is the monopoly with 100% market power of the subway industry in downtown Shanghai. However, if the industry is considered transportation, then there are many substitutes such as taking the bus, riding a bike, and hiring a taxi etc. So yes.
Jacques Zhang says:
Yeah, there're some easy examples of perfect monopolies. There's always common utilities, such as electricity and water. But those are apparently natural monopolies, so I don't know if that fits what you were looking for.. I'm sure there are firms in lesser developed nations that operate without competition, but I'm having trouble specifically naming any.
Calvin Lu says:
I've been thinking about this question after studying regulated monopoly, i'm wondering that if the monopolist firm is forced to produce at the social optimum price but still earning economic profit, does the government still need to subsidize the firm?
Jo Lo says:
Besides the natural monopolies, there are basically no more pure monopoly firms in the world. One industry that at least until recently was a monopoly is the diamond business. Basically the only place to buy diamonds from was South Africa. Now there are companies in the US that produce diamonds and ship it locally. Its a good thing that necessities such as electricity and water are natural monopolies set by the government or else prices for these items would be sky-high. This would cause wide-spread problems as people find it harder to acquire these important goods and services.
Jeewon Oh says:
It's hard to find a pure comonoply, because theres only one seller of that particular product or service, and no firms can enter that market. That means the product has to be unique, and just like what Jacques said, common utilities are an example. I really don't think there are any products or services that does not have a substitute... Can anyone think of any?
Alex Goldman says:
Microsoft used to be a monopoly in the software industry. A decade or so ago, hardly any one bought anything except Windows as the operating system for their computers because it was the best and most convenient software out there at the time. Today, Microsoft isn't quite as monopolistic as they were before because other brands such as Linux and the MacOS have emerged as comdpetitors to Microsoft, but Bill Gates and company still dominate a huge share of the market.
Elaine Lung says:
I'm thinking that the pure monopoly model we've learned about/will be learning about is just that - a model. I mean, a perfect monopoly operates means that the good being produced is completely unique with no viable substitute whatsoever. It's sort of like the pure competition model we've been going over; industries in the real world never fully adhere to that, but it's still useful to apply it to similar industries.Now as for real-world almost-monopolies... There are, like Jacques says, the public utilities. I'm wracking my brains on this one, and I'll venture a guess: Microsoft? For a time?
Jenny Kim says:Well, as Mr. Welker mentioned in class, pure competition and pure monopoly are the extremes on a economic spectrum, and they are "ideal" situations. But there are industries that are close to a pure monopoly. Take Microsoft as an example. Mircosoft is currently taking up a huge percent of the computer market. (well now, Apple's catching up). Although there arent' perfect examples of pure monopoly, there are cases close to one.
Judy Chen says: I agree with Jenny, most of people has microsoft in their companies, except some use Apple. But, basically, there's no companies having as much as percent of market as microsoft.
serena tu says:
well, I don't think there's a pure monopoly, but I was just reading this article describing how the current diamond monopolist company was created. They created the firm so they will have most of the control for selling and discovering more diamonds. But now people don't really need diamond, there is other substitute such as gems, gold, silver, etc. So does the diamond industry still considered to be a monopolist?
Rebecca Sung says:
I think the diamond market is monopolistic because there is really no equal to a diamond. Other gems come close to a diamond, but are not necessarily substitutes for them. We talked in class how there is only one supplier of diamonds, so why would different jewelry shops like Zales and Harry Winston need to say their product is better, when all their diamonds are the same? I just found that interesting.
Tim Chu says:
So i was thinking, and I think there is a good possiblity that there are real monopolies out in society. The company/product just has to be so unique that there is only one. So something like a company for extreme jump-roping or something would be a monopoly if it was the only extreme jump-roping company out there. In fact, many companies that start an industry are monopolies for a small period of time.
Hansen says:
Tim, you bring up a good point here. Maybe Boeing can be considered a monopoly...before the merging of European companies to form Airbus. Also...the defense weaponry Boeing creates was one of a kind before Lockheed Martin I think.
Sharon Li says: Krispy Kreme donuts? I think I heard somewhere before that they keep their recipe in a super-safe so no other donut company can produce the same degree of amazingness that Krispy Kreme donuts have :)
Andy Xu says: What about if we consider China in the search for perfect monopolies? For one, there is China Telecom, the only provider of telecommunications in the entire country, or the monopoly of Sinopec Oil. These examples suggest that while a pure monopoly is extremely rare in a competitive economy, the government can always set policies creating these purely monopolistic companies.
Hansen says: Andy, I agree with the Sinopec Oil. However, as for China Telecom...isn't there China Unicom?
Michael C says: I definetly agree with the statement that it is hard to list some examples of perfect monopolies with specific names. However ultility companies which provide its consumers with some basic need could be considered as a perfect monopoly. Ultility companies such as water and electricity. And although China maybe be generally dominated by the China Telecom I believe that there is also a China Unicom as a competitor making it not perfectly monopolistic.
Claire Moon says: Agreeing with what Andy said, China Mobile is actually one good example monopoly in China. It is really scary sometimes when all of my friends have the mark China Mobile on their phones. I think this pure monopoly is especially true in countries like China where the government power is much stronger rather than countries like the United States where there is hardly any restriction.
Jennifer Choi says: Yeah, I agree with what Claire said. Especially in a country like China, such thing as pure monopoly is possible since many many things are "standardized". As Andy said, China Mobile is the only provider of telecommunications in China, and it certainly is an exmaple of pure monopoly even though it is a rare case. In China, if the government set up China Mobile as the only telecommunication company, it will be a pure monopoly.
Howard says: Yes i believe there is a perfect monopoly in the world. In my compound, there is this guy that invest in making space shuttle related items, I'm not sure what it is exactly, but I've heard that it's the only firm that produces such item. This guy got 5 sports cars parked around his house. He's rich!!!!!!!!!!!
Mina Song says : I am not sure about the China mobile, but I know that Microsoft is not the monopoly, there is some other software companies but, it is not as well known as microsoft and it is not frequently used as Microsoft. And for the Krispy Kreme donuts.....?..... even though they have special recipe, isn't dunkin donuts? But I heard that in Shanghai, Mr. Donuts are monopoly, I heard that the owner of Mr. Donut in Shanghai is some powerful man in china that he restrict all donuts comanies coming in to shanghai. and that's the reason why Beijing has dunkin.
Dana Yeon: Pure monopoly exists only when a single firm is the sole producer of a product for which there are no close substitues. Thus, I have to disagree with you guys that Krispy Kreme and diamonds may be monopolies. First of all, Krispy Kreme is not a monopoly as not only are there myriads of donut stores around the world (ex: Dunkin Donuts, Mister Donuts, etc. that we can name off top of our heads), there are also stores that sell almost identical glazed donuts. Moreover, if I follow your arguments, a prodcuer which produces anything unique is considered a monopoly. But is that so? Then why is McDonalds not a monopoly for the reason that it produces cheese burgers? This is because other hamburgers from fastfood chains such as that of Burger King's are close substitues of McDonald's cheese burger, however unique it may be. Furthermore, the diamond industry, which have commonly been defined as a monopoly is actually not one. This is true as even though De Beers Diamonds have dominated the diamond industry, it no longer and never have, dictated the price or the distribution of it 100%. Additionally, Lev Leviev's LLD USA, another diamond company, has also risen as the key competitor of De Beers Diamonds in recent years. Nevertheless, this is not to say I'm eliminating the possibility that a true monopoly may exist in the world.
Kevin Chiu says: I personally don't think a true monopoly exists in a free-competitive market because it seems unlikely that there would be a single company that is able to efficiently survive (as in economic profit) without another firm attempting to be in the field or industry as them. However, it is possible that there could be a monopoly in a free-competitive market, but they would definitely not be efficiently making money through their unique products... as Tim stated. Government-dictated nations seem quite more likely for the option, as Andy and others have stated, because the government has the ability to set laws and create an industry where only one company can survive in for their own personal benefit.
Michael Daily says: I think Kevin makes a great point. In a free-competitive market in a democracy or similar government it is less likely for a pure monopoly to exist. The only likely possibility of a pure monopoly would be if a company contained cetain technology that could not be matched by any other company. Otherwise, with the prices a monopoly charges, competition of some sort must exist because they can steal away consumers fed up of getting ripped off. However, in a communist government or government similar to it, a pure monopoly is more likely since the government can directly create one.
Mond Gu says:
I agree with what Tim said. Aren’t all new and innovative products somewhat considered to be monopolistic? At least for a certain period until more firms join into that particular industry, then it becomes another type of market structure. Like when IBM first came out with the world’s first computer, wouldn’t that be considered as a monopoly, since IBM is the only computer out there producing such a product for a period? I guess the type of market structure the product belongs in changes over time.
Howard Jing says:
I don't think that an extreme jump-rope making company would be an example of a perfect monopoly, because one of the requesites of being a monopoly is that making your product is really hard to do, and I can't imagine that making an extreme jump-rope would be very demanding. It is true that there might only be one manufacturer out there, but anybody with some rope, and I guess barbed wire would be able to join in the fun.
Kai Lin Fu says:
Would Apple be considered a monopoly because of their one of a kind iPod and iPhone?
Charlie Gao says:
Kai Lin, I don't think Apple can be considered a monopoly because people can choose to buy mp3's and Creative Zens and whatnot instead of buying an iPod. Same with the iPhone. It looks nice, but you don't see many people carrying iphones around. More people have Sony Ericssons, Nokias, all that kind of stuff. So I don't think you can consider Apple a monopoly. Not yet, at least.
Robert Wang says:
I'm going to have to agree with Charlie on this. I think what Apple is trying to do to is to create some sort of a monopoly by making their products generally exclusive. For example, the iPod comes with their own program, they have their own set of add-ons and what not that only work with Apple products, stuff like that. I think it's interesting how there are speaker systems (made by companies other than Apple) that have a special slot catered just for iPods so you can directly stick it on. However, in the bigger picture, Apple isn't a monopoly as their are plenty of substitute products, it's just that Apple has managed to tag their products with something unique (back in the day it was the gigantic memory space, now we have the touch pad iPhone, etc), which makes one think that Apple is sort of a monopoly, but they can't truly be considered a monopoly as their are still substitute goods out there, whether you consider them better or not, they're able to fulfill the same role(s).
Kathie Lee says:
Of course there are substitutes for iPods and iPhones, but doesn't that go for basically every product there is out there? I guess Apple can't be considered a monopoly in this case. Anyway, I think a big reason why iPods are the popular choice for music today is because of the brand name thing.
Create a category for your thoughts, type the category in RED. Choose one of the categories, read and contribute to the discussion, OR create a new category of a topic that interests you.
Monopolies:
Christina Hu says:
Hey guys, can anybody think of an example of a perfect monopoly or anything close to one? I'm starting to think there are none at all anymore, but maybe it's just because my brain is not functioning properly at present.
Andy Xu: I think this will depend on how you define the industry in which the firm is in. For example: the Shanghai Metro is the monopoly with 100% market power of the subway industry in downtown Shanghai. However, if the industry is considered transportation, then there are many substitutes such as taking the bus, riding a bike, and hiring a taxi etc. So yes.
Jacques Zhang says:
Yeah, there're some easy examples of perfect monopolies. There's always common utilities, such as electricity and water. But those are apparently natural monopolies, so I don't know if that fits what you were looking for.. I'm sure there are firms in lesser developed nations that operate without competition, but I'm having trouble specifically naming any.
Calvin Lu says:
I've been thinking about this question after studying regulated monopoly, i'm wondering that if the monopolist firm is forced to produce at the social optimum price but still earning economic profit, does the government still need to subsidize the firm?
Jo Lo says:
Besides the natural monopolies, there are basically no more pure monopoly firms in the world. One industry that at least until recently was a monopoly is the diamond business. Basically the only place to buy diamonds from was South Africa. Now there are companies in the US that produce diamonds and ship it locally. Its a good thing that necessities such as electricity and water are natural monopolies set by the government or else prices for these items would be sky-high. This would cause wide-spread problems as people find it harder to acquire these important goods and services.
Jeewon Oh says:
It's hard to find a pure comonoply, because theres only one seller of that particular product or service, and no firms can enter that market. That means the product has to be unique, and just like what Jacques said, common utilities are an example. I really don't think there are any products or services that does not have a substitute... Can anyone think of any?
Alex Goldman says:
Microsoft used to be a monopoly in the software industry. A decade or so ago, hardly any one bought anything except Windows as the operating system for their computers because it was the best and most convenient software out there at the time. Today, Microsoft isn't quite as monopolistic as they were before because other brands such as Linux and the MacOS have emerged as comdpetitors to Microsoft, but Bill Gates and company still dominate a huge share of the market.
Elaine Lung says:
I'm thinking that the pure monopoly model we've learned about/will be learning about is just that - a model. I mean, a perfect monopoly operates means that the good being produced is completely unique with no viable substitute whatsoever. It's sort of like the pure competition model we've been going over; industries in the real world never fully adhere to that, but it's still useful to apply it to similar industries.Now as for real-world almost-monopolies... There are, like Jacques says, the public utilities. I'm wracking my brains on this one, and I'll venture a guess: Microsoft? For a time?
Jenny Kim says:Well, as Mr. Welker mentioned in class, pure competition and pure monopoly are the extremes on a economic spectrum, and they are "ideal" situations. But there are industries that are close to a pure monopoly. Take Microsoft as an example. Mircosoft is currently taking up a huge percent of the computer market. (well now, Apple's catching up). Although there arent' perfect examples of pure monopoly, there are cases close to one.
Judy Chen says: I agree with Jenny, most of people has microsoft in their companies, except some use Apple. But, basically, there's no companies having as much as percent of market as microsoft.
serena tu says:
well, I don't think there's a pure monopoly, but I was just reading this article describing how the current diamond monopolist company was created. They created the firm so they will have most of the control for selling and discovering more diamonds. But now people don't really need diamond, there is other substitute such as gems, gold, silver, etc. So does the diamond industry still considered to be a monopolist?
Rebecca Sung says:
I think the diamond market is monopolistic because there is really no equal to a diamond. Other gems come close to a diamond, but are not necessarily substitutes for them. We talked in class how there is only one supplier of diamonds, so why would different jewelry shops like Zales and Harry Winston need to say their product is better, when all their diamonds are the same? I just found that interesting.
Tim Chu says:
So i was thinking, and I think there is a good possiblity that there are real monopolies out in society. The company/product just has to be so unique that there is only one. So something like a company for extreme jump-roping or something would be a monopoly if it was the only extreme jump-roping company out there. In fact, many companies that start an industry are monopolies for a small period of time.
Hansen says:
Tim, you bring up a good point here. Maybe Boeing can be considered a monopoly...before the merging of European companies to form Airbus. Also...the defense weaponry Boeing creates was one of a kind before Lockheed Martin I think.
Sharon Li says: Krispy Kreme donuts? I think I heard somewhere before that they keep their recipe in a super-safe so no other donut company can produce the same degree of amazingness that Krispy Kreme donuts have :)
Andy Xu says: What about if we consider China in the search for perfect monopolies? For one, there is China Telecom, the only provider of telecommunications in the entire country, or the monopoly of Sinopec Oil. These examples suggest that while a pure monopoly is extremely rare in a competitive economy, the government can always set policies creating these purely monopolistic companies.
Hansen says: Andy, I agree with the Sinopec Oil. However, as for China Telecom...isn't there China Unicom?
Michael C says: I definetly agree with the statement that it is hard to list some examples of perfect monopolies with specific names. However ultility companies which provide its consumers with some basic need could be considered as a perfect monopoly. Ultility companies such as water and electricity. And although China maybe be generally dominated by the China Telecom I believe that there is also a China Unicom as a competitor making it not perfectly monopolistic.
Claire Moon says: Agreeing with what Andy said, China Mobile is actually one good example monopoly in China. It is really scary sometimes when all of my friends have the mark China Mobile on their phones. I think this pure monopoly is especially true in countries like China where the government power is much stronger rather than countries like the United States where there is hardly any restriction.
Jennifer Choi says: Yeah, I agree with what Claire said. Especially in a country like China, such thing as pure monopoly is possible since many many things are "standardized". As Andy said, China Mobile is the only provider of telecommunications in China, and it certainly is an exmaple of pure monopoly even though it is a rare case. In China, if the government set up China Mobile as the only telecommunication company, it will be a pure monopoly.
Howard says: Yes i believe there is a perfect monopoly in the world. In my compound, there is this guy that invest in making space shuttle related items, I'm not sure what it is exactly, but I've heard that it's the only firm that produces such item. This guy got 5 sports cars parked around his house. He's rich!!!!!!!!!!!
Mina Song says : I am not sure about the China mobile, but I know that Microsoft is not the monopoly, there is some other software companies but, it is not as well known as microsoft and it is not frequently used as Microsoft. And for the Krispy Kreme donuts.....?..... even though they have special recipe, isn't dunkin donuts? But I heard that in Shanghai, Mr. Donuts are monopoly, I heard that the owner of Mr. Donut in Shanghai is some powerful man in china that he restrict all donuts comanies coming in to shanghai. and that's the reason why Beijing has dunkin.
Dana Yeon: Pure monopoly exists only when a single firm is the sole producer of a product for which there are no close substitues. Thus, I have to disagree with you guys that Krispy Kreme and diamonds may be monopolies. First of all, Krispy Kreme is not a monopoly as not only are there myriads of donut stores around the world (ex: Dunkin Donuts, Mister Donuts, etc. that we can name off top of our heads), there are also stores that sell almost identical glazed donuts. Moreover, if I follow your arguments, a prodcuer which produces anything unique is considered a monopoly. But is that so? Then why is McDonalds not a monopoly for the reason that it produces cheese burgers? This is because other hamburgers from fastfood chains such as that of Burger King's are close substitues of McDonald's cheese burger, however unique it may be. Furthermore, the diamond industry, which have commonly been defined as a monopoly is actually not one. This is true as even though De Beers Diamonds have dominated the diamond industry, it no longer and never have, dictated the price or the distribution of it 100%. Additionally, Lev Leviev's LLD USA, another diamond company, has also risen as the key competitor of De Beers Diamonds in recent years. Nevertheless, this is not to say I'm eliminating the possibility that a true monopoly may exist in the world.
Kevin Chiu says: I personally don't think a true monopoly exists in a free-competitive market because it seems unlikely that there would be a single company that is able to efficiently survive (as in economic profit) without another firm attempting to be in the field or industry as them. However, it is possible that there could be a monopoly in a free-competitive market, but they would definitely not be efficiently making money through their unique products... as Tim stated. Government-dictated nations seem quite more likely for the option, as Andy and others have stated, because the government has the ability to set laws and create an industry where only one company can survive in for their own personal benefit.
Michael Daily says: I think Kevin makes a great point. In a free-competitive market in a democracy or similar government it is less likely for a pure monopoly to exist. The only likely possibility of a pure monopoly would be if a company contained cetain technology that could not be matched by any other company. Otherwise, with the prices a monopoly charges, competition of some sort must exist because they can steal away consumers fed up of getting ripped off. However, in a communist government or government similar to it, a pure monopoly is more likely since the government can directly create one.
Mond Gu says:
I agree with what Tim said. Aren’t all new and innovative products somewhat considered to be monopolistic? At least for a certain period until more firms join into that particular industry, then it becomes another type of market structure. Like when IBM first came out with the world’s first computer, wouldn’t that be considered as a monopoly, since IBM is the only computer out there producing such a product for a period? I guess the type of market structure the product belongs in changes over time.
Howard Jing says:
I don't think that an extreme jump-rope making company would be an example of a perfect monopoly, because one of the requesites of being a monopoly is that making your product is really hard to do, and I can't imagine that making an extreme jump-rope would be very demanding. It is true that there might only be one manufacturer out there, but anybody with some rope, and I guess barbed wire would be able to join in the fun.
Kai Lin Fu says:
Would Apple be considered a monopoly because of their one of a kind iPod and iPhone?
Charlie Gao says:
Kai Lin, I don't think Apple can be considered a monopoly because people can choose to buy mp3's and Creative Zens and whatnot instead of buying an iPod. Same with the iPhone. It looks nice, but you don't see many people carrying iphones around. More people have Sony Ericssons, Nokias, all that kind of stuff. So I don't think you can consider Apple a monopoly. Not yet, at least.
Robert Wang says:
I'm going to have to agree with Charlie on this. I think what Apple is trying to do to is to create some sort of a monopoly by making their products generally exclusive. For example, the iPod comes with their own program, they have their own set of add-ons and what not that only work with Apple products, stuff like that. I think it's interesting how there are speaker systems (made by companies other than Apple) that have a special slot catered just for iPods so you can directly stick it on. However, in the bigger picture, Apple isn't a monopoly as their are plenty of substitute products, it's just that Apple has managed to tag their products with something unique (back in the day it was the gigantic memory space, now we have the touch pad iPhone, etc), which makes one think that Apple is sort of a monopoly, but they can't truly be considered a monopoly as their are still substitute goods out there, whether you consider them better or not, they're able to fulfill the same role(s).
Kathie Lee says:
Of course there are substitutes for iPods and iPhones, but doesn't that go for basically every product there is out there? I guess Apple can't be considered a monopoly in this case. Anyway, I think a big reason why iPods are the popular choice for music today is because of the brand name thing.
Dana Yeon says:
It is true that Apple is fascinatingly innovative, yet one cannot deny that there are myriad of substitutes for iPods. After all, iPod is just another type of a music playing device. Thus, it's pretty obvious that Apple is not a monopoly.
Jonathan Lau says:
Yea, I don't think Apple can be considered a monopoly because there are many substitutes to iPods. Although you see the majority of students at our school carrying them around, most locals probably can not afford them. Instead, they go for the less exclusive yet dramatically cheaper mp3 player, which work just as well as iPods do, but don't have the apple logo on them. For some people Apple might be a monopoly, but in reality, there are many other substitute products that are just as good as the products Apple produce.
Jennifer Choi says:
I, too, agree with what most people already said about Apple and its iPod being monopoly. There are many other different substitutes for iPods, so Apple's iPod cannot be a monopoly. Just because it seems like everyone has iPod in our school, it doesn't mean and it acually is. Acutally, in Korea, the most popular mp3 brand is iriver. And I think iriver did have a monopoly over mp3 players in Korea a few years ago. But now the monopoly is broken becuase over a few years the number of iPod users in Korea significantly increased. As an iriver user, I think it is because iriver mp3 players have such small capabilities (usually they are smaller than 1GB), compared to iPods which has 4GB to 80GB at most. In addition to that now Apple is attracting more and more poeple with it's inovative designs, it seems there are significant increase in the number of iPod users so that it almost seems like iPods have a monopoly in music playing device industry. But acutally it does not.
Jeff Ye says:
I think Tim made a great point up there. If an emerging company started production of a totally "random" product, wouldn't they have a monopoly over the product, if only temporarily? I think these are some of the only examples of a true monopoly. As for Kai Lin's question, Charlie's correct in saying that there are many different types of substitutes for both the iPod and iPhone, including mp3's / mp4's for the iPod, and cell phones for the iPhone.
Kristie says:
Like many of you have already said, I also don't think Apple is a monopoly. As there are other products that people can substitute for the iPod and iPhone. Creative Zen, iRiver, Zune and other mp3 players would all be substitues for an iPod. The definition of a monopoly states that the firm is the sole producer of a product, and the product has no close substitutes.
Yun Qi Mok says:
Our world isn't perfect, so why should perfect monopolies exist? If a totally "random" product was produced, it might be a temporary monopoly, but then the government might step in. Soon, something else will be produced that will be similar if not a substitute to the "random" product. Human minds just dont operate randomly, so its really difficult to create something completely never before seen. All things need go through slow development steps, like the computer which is sort of "random" for that time period, so then many companies who are far seeing will try to latch onto the ride as quickly as possible; thus, no monopoly.
Katherine Yang says:
Does a product count as a monopoly if there are substitutes, but a clear majority chooses that one product instead? Like the ipod, like you guys said before. It feels like a monopoly, even if it isn't, becuase there are thousands of other brands and substitutes to choose from, and yet most people choose ipods.
Soyeon Says:
I agree with Katherine in that it feels like a monopoly if a clear majority prefers a certain product. Microsoft seems like a monopoly in computer software market, too. However, it is not monopoly because there is still many substitues and there are actually people choosing products of other firms other than Apple or Microsoft. It is rather monopolistic competition, but just that Apple and Microsoft occupies large portion of the industry.
Elaine Lung says:
Well, there'd have to be a reason consumers would choose that one product over all else; it has to be so differentiated that they wouldn't even consider the other possibilities, in which case I suppose the good could be considered "unique." I don't think the iPod works in this example. Sure, it has some 72.7% of the market share for retail music player sales, but then there's still that 27.3%, and that 27.3% is still quite a big chunk.
Jeff Ye says:
Has anyone talked about price discriminating monopolies yet, because i have a question. Would blind bids, where buyers enter the amount of money they would pay for a specific unique product without looking at anyone else's bids and the person who bid the highest gets to purchase the product, be a price discriminating monopoly?
Howard Jing says:
I think that blind bidding is a form of price discrimination since price discrimination is when a company charges different prices for the same product. In a blind auction, everyone values the product differently and would thus place different bids. The one with the highest bid wins, but nobody winds up with consumer surplus.
Jessica Chiang says: Hey, isn't this example like the price per click that we talked about in class?
Annie Sung says:
Relating to what Howard said, I think auctions are a form of price discrimination, as the sellers are putting the product out there and letting the person who is willing to pay the highest price have it. Thus, like Ms. Close said in class, some people are willing to pay ridiculous prices for seemingly worthless things, but these things may hold special value to certain people. Through this, sellers benefit from different tastes of some consumers over other consumers.
Monopoly -the GAME:
Yun Qi Mok says:
Everyone has played Monopoly in their life...but has anyone ever really ended the game with all the other players bankrupt? Indeed...no. Thus, monopolies should technically never exist. There are always players in any market, whether they are losing players, but they never actually disappear for ONE monopoly to take over. Back to the game - is there any economic basis for the game? Is it simply luck at landing at the correct places? Do the real winners of the game have things like...marginal cost and marginal revenue floating around their brains as they play?
Helen Chu says:
Hahaha...interesting idea on the game. But first of all, where did they come up with the name "monopoly" for the game? The way I see it, the game should be called "oligopoly". Not only does it sound cooler, the game also fits the characteristics of an oligopoly much better than a monopoly - few "firms"/players, differentiated product (nice street or bad street). As for the people who always win monopoly (not the ones who win like once or twice in their lives out of pure dice luck - like me), they might not know it, but they are thinking about marginal cost and marginal revenue, or more general, marginal cost and marginal benefit. When you already have two houses on your property, some people choose to pass on buying the third house. This is because you might be subconsciously thinking like an economist - the marginal benefit you get from that third house is probably less than the marginal benefit of something else you can buy with the same marginal cost. Whether you are right or wrong on your analysis, those ideas DO go through people's heads as they play.
Julie Lin says: monopolists dont achieve maximum efficiency because without competition from other firms, monopolists may not have the incentive to produce at the lowest possible cost, as a result at a particular level of output, the firm may produce at an ATC higher than that it is able to achieve if it is producing in the most efficient method available.
Karen Chen says:
Nahh, the name Oligopoly doesn't roll off the tongue as nicely as Monopoly haha. Well, once before, I have defeated other players by making all of them bankrupt. But that was just that one time...I think Helen makes an excellent point. We unconsciously think about cost and revenue when trying to decide whether or not to buy the property or whether we should upgrade it. AND we also consider all these factors when merely deciding between another roll of the dice or picking a Chance card.
Serena Tu says:
wow, i have never made connection between the game monopoly and the real monopoly in the society. Now after it's mentioned i just realized that playing the game monopoly actually has something to do with economics. People always want to buy the land/ house that will give them the max. profit. However, when i play the game, it was never finished.
Timothy Sun says:
It's certainly no perfect competition. Obviously, Yun Qi, there isn't a large gap in skill between you and the players. I have a 75% of actually winning in about three hours since everyone else usually sucks. Come back when you've built a hotel on Boardwalk, Park Place, and captured all four railroads. The fact of the matter is, Monopoly illustrates a high element of luck; it's sometimes all in the dice. I think it represents sort of an oligopoly; each is affected by its rivals' decisions. I think that there are certain aspects of profit maximization in the game. When trying to buy another person's property to complete the set of colors, you have to make sure you make profit by trying to buy this property from it. Additionally, the rent collected from a square makes a difference. For example, I don't think anyone is going to be building on Mediterranean or Baltic Ave. (the first two properties); the profit is too low (although revenue may seem high). There are just these small economic qualities of the game, in my opinion. By the way, this has been my favorite of all Student Thoughts so far.
Alice Su says:
Hahaha Tim, that was a pretty cocky thing to say... "I have a 75% change of actually winning in about three hours since everyone else usually sucks." HA! I CHALLENGE YOU TO A GAME OF MONOPOLY... once our AP exams are over of course. Bring it on.
Oh and I do agree that this is one of the most interesting Student Thoughts- so much economic knowledge to be derived from a board game! We might actually do further analysis on this for our podcast project, so I won't elaborate any more here.
Judy Chen says:
True! We don't think so much when we are actually playing monopoly. It is basically depends on how lucky you are. However, even we don't really think of the terms, such as marginal cost, total revenue, we are actually applying the concept when we decide which spot to houses in order to earn profits. So maybe, even though we never end the game with people actually bankrupt, I think it is somehow related to actual economics.
Conrad Liu says:
Woo, I've been waiting for a thought forum on Monopoly the game itself. Anyway, I personally don't think that Monopoly plays like...well, a monopoly, as many other people think. For one thing, there are no few firms (us) in which we have complete control over the market--instead, a large chunk of that power is distributed amongst us, the firms in the game. In this way, I agree with Helen, that Monopoly plays more like an oligopoly than anything else. Ah well, all in all it's still a fun game.
Drew Venkatraman says:
I will take your money if you play me in monopoly. Monopoly is truly like a real monopoly, it allows you to be the boss and control everyone else. But really,what makes the game so sweet is the fact that its not a monopoly at all, but more like a monopolisitic spectrum if you will. In the beginning its purecompetition, the prices are low, they are set, and everyone starts out with nothing and must build their empire. Then monopolistic competition occurs while people accquire more and more goods, finally I think it ends with oligopolies becuase although one person ends up winning, usually people quit before then so its more like there a few firms competing. Finally i think you could add in the economies and diseconomies of scale. When you start out you cannot buy capital (aka houses and hotels) or anything else and at the end eventually, you become so good (like I usually do;) ) and then you have no idea what your other hand is doing (which is sometimes when i end up losing).
Trevor Sun says:
Monopoly the game and real a monopoly are very different. As most of you have already stated the game version is more like an oligopoly. Instead of there being just one firm there are many and the power each firm has in setting the market price is equal to one another. Also, I;m still puzzled on how one wins this games because every time I play it we never finish it.
Jo Lo says:
I agree to the fact that Monopoly is more of a game of luck than skill. It's pretty easy, you just roll the dice and move forward spaces and collect money (or lose money) along the way. It would be oligopoly in a way because there are multiple players that influence and compete against each other. Monopoly would happen at the end when the winner is decided and he or she is rich and becomes a snob because he/she had outlasted them for 5+ hours and would be bragging about it.
Annie Sung says:
HAHA Helen, I like your idea of "oligopoly", it does sound a lot more interesting than Monopoly, but I think the point of the game is to make it a monopoly, YOUR monopoly. Although I've never really thought about economics while playing monopoly until now, I feel like there's also a mathematical factor to the game. I agree with Jolo that monopoly depends a lot on luck, but there are certain tactics that I've seen here and there using the probability of most rolled numbers and investing in corresponding properties. However, I do feel like oligopoly would be a more suitable name for the game while it's being played, as all the players depend on each other's property and chances to try and win.
Kevin Yeh says: well the point of monopoly is not that there IS a monopoly per se, but that you are trying to ACHIEVE a monopoly through various actions. So although it is an interesting idea to call it an oligopoly, because that's what it appears to be, it doesnt change the nature of the game and so it doesnt really require a change of name. And yunqi, I have indeed ended a game in which someone comes out victorious and in total control of the market, eg a pure monopoly.
Mina Song says: well... may be the game of monopoly is to have fun rather than learn any economic idea of monopoly. But, to win the game isn't player should become a monopoly, i mean to win the game one person should have most of the land. May be it isn't a pure monopoly, but others have barrier of ATC. A player who has fewer lands will spend more money while he moves than earning. Therefore, this player have barrier of buying buildings and hotels. itsn't it?????
Jessica Chiang says: Haha. Isn't it basically impossible to become a pure monopoly? I mean, you would have to own EVERYTHING, which means that the other players would just be...rolling the dice and doing nothing. I guess you can technically have monopoly power over the utilities and the train stations. Is there a concentration ratio for monopolies? Like, if you have 80% of the market you're a monopoly? Isn't that what the frisbee market is like?
Kai Lin Fu says:
Well if there are substitute goods, then you wouldn't be a monopoly. Are there any substitute goods in the frisbee market?
Pure Competition:
Chan Min Park says: Everybody mentioned already, Pure Competition is good for society. In the long-run equilibrium, the firm is efficient, both productive and allocative (as seen by the P = MC = min. ATC) At any output lower than the equilibrium output, there is going to be an efficiency loss (deadweight loss), and therefore at the equilibrium output, the producer and consumer surplus is maximized. However as we know, this does not really exist, but it is something society strives for. Also as jee won mentioned, since there is limited resources, that is what makes firms efficient. I see why society wants pure competition, but as Katherine mentioned, why would firms want it? In the short-run they might gain profit, but in the long run, its just economic profit.
Christina Hu says: We learned in class that pure competition is something society should strive for, as it creates maximum efficiency. But, seeing as how there are limited resources, wouldn't pure competition actually be bad for the economy, the study of which, is, after all, the study of how best to use what scarce resources we have, since the unlimited number of firms would put a huge strain on said resources?
Caleb Liao says: Uh... no. A purely competitive industry doesn't only acheive maximum resources efficiency, it also creates an industry that only has a set amount of sellers within. There would never be unlimited amounts of sellers because like you said, there are like limited amounts of resources and on top of that there are limited amounts of buyers therefore if there were unlimited sellers, not everyone would be earning money, even if they sold at the market price. So the purely competitive industry takes care of any excess amounts of firms within a market by forcing them out through losses in profit.
Margaret Liu says: I'm not sure I totally understand what you're trying to say, but how would efficiency be bad for the economy? Do you mean the environment? If we have scarce resources then we should obviously try to make the most of them.
Jenny Kim: Pure competition IS good for both the comsumers and the producers since producers can earn economic profits (at least for a short while). And you're right that it created maximum efficiency; this is efficiency among the resources that are given. Firms do not use more resources than what is given.
Nicole Wong: The whole point of a purely competitive market is to use resources as efficiently as possible. By saying that the resources are being used efficiently, it does not mean that more resources will be used to maximize produce. It means that the resources that firms already have will be used more "entirely" than they were originally. For example, a worker who used to work 5 hours a day now works 9 hours. There would not be an added strain on resources because there doesn't necessarily have to be an additional amount of resources used by each firm.
Katherine Yang: But isn't pure competition not something firms want? Firms want an economic profit, even though, in the long run, it's not going to benefit the firm because the imbalance is going to right itself from new firms joining the market. Society want pure competition because it ensures maximum efficiency and that profits are equal throughout the industry and that no firm gets more than it needs.
Michael Chow: Without a doubt Pure Competition is good for society as a whole, especially for consumers. Remembering that in a Purely Competitive markets producers maximize their effeciency with the use of both, Productive Effiency and Allocative Effiency. In this case firms or producers find the least costly method in producing goods for consumers, because of the competition with other firms.
Jeewon Oh: As Michael said, Pure Competition is definitely good for the society. I see what you're getting at, Christina, but limited resources would not make pure competition bad for the economy. Pure competition is all about efficiency, and being efficient is making the utmost out of what we already have. And scarce resources and unlimited number of firms is what makes this all efficient. If there were unlimited amount of resources, there would not be any competition, and therefore no efficiency. I don't know if I really understood your question though (;
Richard Tu: Christina said “since the unlimited number of firms would put a huge strain on said resources?” This is true because resources are scare, and thus if a firm wants to stay in the industry, they will have to be efficient and use the resources wisely. In pure competition, there is freedom of entry and exit and therefore firms that are not efficient will have to exit the market. Thus, in order to survive, productive efficiency and allocative efficiency will set in making firms will be as efficient as possible, benefiting the society. Technically the number of firms in the industry are unlimited, but there is really limited space for firms to exist and survive in.
Soyeon yoon says: I think Christina has a point there when she says that unlimited number of firms would put huge strain on resources. Eventhough pure competition raise the efficiency and try to make the best product out of it, in the process of doing that actually an "unlimited" amount of resources will be used and that could be actually a waste. HOWEVER, still without competition the utmost product cannot be made so I guess there should be a middle point to solve this problem from happening.
Serena Tu: For pure competition industries to survive, they must achieve allocative and productive efficiency. If they don't use their resources effectively to achieve the maximum output, then they might have to leave the market, since they are not making any profit. probably won't even be earning the normal profit.
Jessica Chiang: Well, new firms wouldn't choose to enter the industry if the costs are too high. Christina, you said that resources would become scarce. If they were scarce, it would mean that their price would increase. Not many firms are willing to enter the industry if their explicit costs are high. They might not profit from entering the industry. Also, firms in the industry might leave if they aren't making a profit. By the way, what is an example of a perfectly competitive industry? Ms. Close said that agriculture isn't exactly perfectly competitive, and that perfect competition is really rare in our society.
Chris Seah:In response to Jessica's query about an existing competetive industry... the whole idea is only a theory that we can approach. Like Ms. Close has covered, the Agriculture industry comes closest to this ideal. Also, I have read that the stock market, excluding large insitutional banks, represents this idea quite well. I guess that when anything has the word "perfect" in it, it's more of an idea as opposed to a reality.
Kevin Ma: I agree with Chris that it is just an idea to follow, like a guide. The business can not be perfectly competitive because it will lack some of the requirements. Another example of a close to perfectly competitive market is eBay. Because in eBay, there are almost no entry barriers to sellers and there are many potential buyers. Also the buyers can influence the price.
Jessica Ng: Back to Christina's point about how a perfectly competitive market is "bad for the economy." That I believe, is not true. You brought up a good point that it might put a strain on the said resources. But then again, these resources are already strained. There are limited resources for our unlimited wants. In a perfect competition, it is because of the fact that so many firms are competing against each other in maximizing profits with minimal costs that all the "right" goods are produced to the best quality. This relates to Adam Smith's "Invisible Hand." As firms seek to further their self interest, the invisible hand organizes these private interests in a way that is in sync with society's interest in using scarce reources efficiently. Consumer and producer surplus is at a max in a perfectly competitive market. There is no other way to use these resources any more effeciently. Any types of markets that are not purely competitive (which is the case for virtually all the markets realistically) thus is not 100% allocatively effecient with the resources at hand. Therefore, resources in a competitive market is not "strained", but rather, handled in the most effecient way possible.
Charlie Gao says:
I was wondering. In the long run of a perfectly competitive industry, there are no economic profits being gained, only normal profits. Does that mean that there is no producer surplus? Because you're only selling things at the lowest possible price, thus gaining no utility. Anyone agree or disagree?
Chris Seah: I disagree with you, Charlie. The non-existence of economic profits does not necessarily take away producer surplus. If you look at your typical P.C. Industry graph, as long as demand and supply are down-sloping, there remain areas of maximized producer and consumer surplus, since everyone is forced to sell at the market price.
Kevin Chiu says:
I wouldn't say that no utility is gained for a firm in a perfectly competitive industry, as if normal profit is satisfied, the firm must have some utility as they are earning what they value themselves as; therefore, firms that gain normal profit gain enough utility to give them an incentive to stay in the industry. In additoin, just because a firm sells things at the lowest possible price doesn't mean they're not gaining utility.. I don't see the relation between those two.
Howard Lin says: In real life, there is no perfectly competitive market structure, because even though one of the major charactoristics of pure competitive markets is it's ZERO barriers to entry, there's stuill ought to be some kind of money needed to start a business.... (:
Jonathan Lau says: Just because there is no economic profits being gained from a perfectly competitve industry does not mean that no utility is being gained either. Like Kevin said, there must be at least some utility gained from a normal profit, or else there would be no incentive to remain in the market. And like Chris said, It is important to take into account that in a perfectly competitive industry, everyone is forced to sell at the market price.
Angel Liu says: Actually i think there is a perfectly competitive market--local vegie market. There is no barrier of entry, and since every vendor sells the same vegie, they must all sell their vegies at the same price. Although they might not be earning economic profit, they are exchanging foods between each other so they are sufficient to survive. I guess that's why farmers in the countryside are naive because they don't ever have to compete; everyone gets their share of foods if they are willing to work.
Monopolistic Competition
Emily Yeh says: So if most of the industries that we can name are largely oligopolist, then what is an example of monopolistic competition? Like, would the shops at Yuyuan or Xiang Yang market be more pure competition or monopolistic competition? Afterall, the products they sell are identical- but it seems that the demand curve wouldn't be a straight line. For instance, the locals perhaps have a lower price line than would the foreigners the sellers try to earn larger profits from. In this case, are they "price takers" or "price makers"? Or is this a case of price discrimination in monopolistic competition?
Hansen says: Interesting discussion so far! I think that another example of monopolistic competition would be the convenience stores around Shanghai. There are plenty of franchises but also the easy ability for entry by simply opening your own. Most products sold by the stores are the same but like the YuYuan/Xiang Yang example provided by Emily, the curves may be different here based on other factors such as location.
Tim says:
really? I actually think that there are more examples of monopolistic competion in our everyday lives. Yes the sellers in Yuyuan would be more of a pure competition. In monopolistic competition, firms try to distinguish their goods. That isnt really the case with shops in Yuyuan or xiangyang. Also i would have to disagree with you on the convenience stores Hansen. As far as i know, there are only 3 or 4 convenience store companies. Yes there may be lots but they're still owned by a larger firm.
Nicole Wong says:
I think it's right that there's mostly monopolistic competition in our daily lives. Seeing as pure monopoly isn't actually possible, a lot of the markets these days have purely competitive aspects, but not as exteme. I can't help but think, however, that there are more monopolistic firms than we think. For example, most people hadn't realised that we have one right in our school (Eurest). Are monopolies more common than we think?
Claire Moon says:
I agree with Nicole's point that most of the industries in our daily lives are monopolistic competition. It is easier to find monoplolistic competition than to find pure monopoly in our lives. For example, electronics companies such as Sony, Samsung, Toshiba, and LG are monopolistic competitors, and they are easy to find around us while purely monopolistic firms like Eurest (in our school) or local facilities such as power supply plant are hard to find in our daily lives.
James Tsao says:
Man, most of the industries in this world are in a form of monopolistic competition. For example, restaurants are monopolistic competitive since the food they serve are differentiated, entry and exit are relatively easy but not as easy as pure competition, and demand is highly elastic. It is impossible for restaurants to collude because there are too many restaurants out there, and in the same time, every one of them performs independent action because each restaurant can set its own pricing policy without considering the prices of every other restaurants in the region.
Rebecca Sung says:
Well the big thing in monopolistic competition is branding. Like Claire said, the electronic companies are monopolistic competitors. When you buy a television set, usually the tvs have the brand name right in the front. I was actually thinking of car companies being monopolistic competitors; lots of producers of cars and each one is branded. Mercedes with that circle cut into thirds, BMW with its blue, black, and white logo, Honda's "H", etc.
Kevin Ma says:
Wouldn't the car industry be Oligopoly? Since there are many barriers to entry such as just getting the capital is hard. Such as finding space, money, materials, and getting a factor. They also have power over the price of their cars. For example, Ferrari can charge like 500,000 for one of their cars while Toyota charges 30,000.
Jo Lo says:
I agree with Kevin, the car industry leans more towards being an oligopoly rather than a monopoly. But the brands you find more is different around the world. In the US the majority of car brands you'd find would be Toyota, Ford, Mazda, etc. Here in China, most cars are made by Volkswagon, and a few BMWs and Kias. It all depends on where in the world you are.
Trevor Sun says:
I agree with Kevin, the car industry is more of an oligopoly than a monolistic competition market. It has more traits of an oligopoly in my view, for example the heavy advertising, competition and the few main firms in the market such as Daimler, Honda, etc. However there is more than just a few firms in this market which is the only thing I can think of right now that makes the car market not and oligopoly.
Cassy Chang says:
In response to Nicole's point about Eurest being a monopoly, it really depends on the context. Within our school it is, but there are other companies in competition within the market, for instance SAS used to have Sodexho instead of Eurest. And yes I think most of the industries are monopolistic competitive firms, i mean look at the hundreds of brands of products that are available!
Mond Gu says:
I agree with Cassy that it depends on how we look at Eurest to determine whether or not it is a monopoly. In our school it is the monopoly of selling us food, but it is also in competition with other companies like Sodexho who mainly do cafeteria. I also agree with Kevin that the automobile industry is an oligopoly.
Jonathan Lau says:
Yea, I don't think Apple can be considered a monopoly because there are many substitutes to iPods. Although you see the majority of students at our school carrying them around, most locals probably can not afford them. Instead, they go for the less exclusive yet dramatically cheaper mp3 player, which work just as well as iPods do, but don't have the apple logo on them. For some people Apple might be a monopoly, but in reality, there are many other substitute products that are just as good as the products Apple produce.
Jennifer Choi says:
I, too, agree with what most people already said about Apple and its iPod being monopoly. There are many other different substitutes for iPods, so Apple's iPod cannot be a monopoly. Just because it seems like everyone has iPod in our school, it doesn't mean and it acually is. Acutally, in Korea, the most popular mp3 brand is iriver. And I think iriver did have a monopoly over mp3 players in Korea a few years ago. But now the monopoly is broken becuase over a few years the number of iPod users in Korea significantly increased. As an iriver user, I think it is because iriver mp3 players have such small capabilities (usually they are smaller than 1GB), compared to iPods which has 4GB to 80GB at most. In addition to that now Apple is attracting more and more poeple with it's inovative designs, it seems there are significant increase in the number of iPod users so that it almost seems like iPods have a monopoly in music playing device industry. But acutally it does not.
Jeff Ye says:
I think Tim made a great point up there. If an emerging company started production of a totally "random" product, wouldn't they have a monopoly over the product, if only temporarily? I think these are some of the only examples of a true monopoly. As for Kai Lin's question, Charlie's correct in saying that there are many different types of substitutes for both the iPod and iPhone, including mp3's / mp4's for the iPod, and cell phones for the iPhone.
Kristie says:
Like many of you have already said, I also don't think Apple is a monopoly. As there are other products that people can substitute for the iPod and iPhone. Creative Zen, iRiver, Zune and other mp3 players would all be substitues for an iPod. The definition of a monopoly states that the firm is the sole producer of a product, and the product has no close substitutes.
Yun Qi Mok says:
Our world isn't perfect, so why should perfect monopolies exist? If a totally "random" product was produced, it might be a temporary monopoly, but then the government might step in. Soon, something else will be produced that will be similar if not a substitute to the "random" product. Human minds just dont operate randomly, so its really difficult to create something completely never before seen. All things need go through slow development steps, like the computer which is sort of "random" for that time period, so then many companies who are far seeing will try to latch onto the ride as quickly as possible; thus, no monopoly.
Katherine Yang says:
Does a product count as a monopoly if there are substitutes, but a clear majority chooses that one product instead? Like the ipod, like you guys said before. It feels like a monopoly, even if it isn't, becuase there are thousands of other brands and substitutes to choose from, and yet most people choose ipods.
Soyeon Says:
I agree with Katherine in that it feels like a monopoly if a clear majority prefers a certain product. Microsoft seems like a monopoly in computer software market, too. However, it is not monopoly because there is still many substitues and there are actually people choosing products of other firms other than Apple or Microsoft. It is rather monopolistic competition, but just that Apple and Microsoft occupies large portion of the industry.
Elaine Lung says:
Well, there'd have to be a reason consumers would choose that one product over all else; it has to be so differentiated that they wouldn't even consider the other possibilities, in which case I suppose the good could be considered "unique." I don't think the iPod works in this example. Sure, it has some 72.7% of the market share for retail music player sales, but then there's still that 27.3%, and that 27.3% is still quite a big chunk.
Jeff Ye says:
Has anyone talked about price discriminating monopolies yet, because i have a question. Would blind bids, where buyers enter the amount of money they would pay for a specific unique product without looking at anyone else's bids and the person who bid the highest gets to purchase the product, be a price discriminating monopoly?
Howard Jing says:
I think that blind bidding is a form of price discrimination since price discrimination is when a company charges different prices for the same product. In a blind auction, everyone values the product differently and would thus place different bids. The one with the highest bid wins, but nobody winds up with consumer surplus.
Jessica Chiang says: Hey, isn't this example like the price per click that we talked about in class?
Annie Sung says:
Relating to what Howard said, I think auctions are a form of price discrimination, as the sellers are putting the product out there and letting the person who is willing to pay the highest price have it. Thus, like Ms. Close said in class, some people are willing to pay ridiculous prices for seemingly worthless things, but these things may hold special value to certain people. Through this, sellers benefit from different tastes of some consumers over other consumers.
Monopoly -the GAME:
Yun Qi Mok says:
Everyone has played Monopoly in their life...but has anyone ever really ended the game with all the other players bankrupt? Indeed...no. Thus, monopolies should technically never exist. There are always players in any market, whether they are losing players, but they never actually disappear for ONE monopoly to take over. Back to the game - is there any economic basis for the game? Is it simply luck at landing at the correct places? Do the real winners of the game have things like...marginal cost and marginal revenue floating around their brains as they play?
Helen Chu says:
Hahaha...interesting idea on the game. But first of all, where did they come up with the name "monopoly" for the game? The way I see it, the game should be called "oligopoly". Not only does it sound cooler, the game also fits the characteristics of an oligopoly much better than a monopoly - few "firms"/players, differentiated product (nice street or bad street). As for the people who always win monopoly (not the ones who win like once or twice in their lives out of pure dice luck - like me), they might not know it, but they are thinking about marginal cost and marginal revenue, or more general, marginal cost and marginal benefit. When you already have two houses on your property, some people choose to pass on buying the third house. This is because you might be subconsciously thinking like an economist - the marginal benefit you get from that third house is probably less than the marginal benefit of something else you can buy with the same marginal cost. Whether you are right or wrong on your analysis, those ideas DO go through people's heads as they play.
Julie Lin says: monopolists dont achieve maximum efficiency because without competition from other firms, monopolists may not have the incentive to produce at the lowest possible cost, as a result at a particular level of output, the firm may produce at an ATC higher than that it is able to achieve if it is producing in the most efficient method available.
Karen Chen says:
Nahh, the name Oligopoly doesn't roll off the tongue as nicely as Monopoly haha. Well, once before, I have defeated other players by making all of them bankrupt. But that was just that one time...I think Helen makes an excellent point. We unconsciously think about cost and revenue when trying to decide whether or not to buy the property or whether we should upgrade it. AND we also consider all these factors when merely deciding between another roll of the dice or picking a Chance card.
Serena Tu says:
wow, i have never made connection between the game monopoly and the real monopoly in the society. Now after it's mentioned i just realized that playing the game monopoly actually has something to do with economics. People always want to buy the land/ house that will give them the max. profit. However, when i play the game, it was never finished.
Timothy Sun says:
It's certainly no perfect competition. Obviously, Yun Qi, there isn't a large gap in skill between you and the players. I have a 75% of actually winning in about three hours since everyone else usually sucks. Come back when you've built a hotel on Boardwalk, Park Place, and captured all four railroads. The fact of the matter is, Monopoly illustrates a high element of luck; it's sometimes all in the dice. I think it represents sort of an oligopoly; each is affected by its rivals' decisions. I think that there are certain aspects of profit maximization in the game. When trying to buy another person's property to complete the set of colors, you have to make sure you make profit by trying to buy this property from it. Additionally, the rent collected from a square makes a difference. For example, I don't think anyone is going to be building on Mediterranean or Baltic Ave. (the first two properties); the profit is too low (although revenue may seem high). There are just these small economic qualities of the game, in my opinion. By the way, this has been my favorite of all Student Thoughts so far.
Alice Su says:
Hahaha Tim, that was a pretty cocky thing to say... "I have a 75% change of actually winning in about three hours since everyone else usually sucks." HA! I CHALLENGE YOU TO A GAME OF MONOPOLY... once our AP exams are over of course. Bring it on.
Oh and I do agree that this is one of the most interesting Student Thoughts- so much economic knowledge to be derived from a board game! We might actually do further analysis on this for our podcast project, so I won't elaborate any more here.
Judy Chen says:
True! We don't think so much when we are actually playing monopoly. It is basically depends on how lucky you are. However, even we don't really think of the terms, such as marginal cost, total revenue, we are actually applying the concept when we decide which spot to houses in order to earn profits. So maybe, even though we never end the game with people actually bankrupt, I think it is somehow related to actual economics.
Conrad Liu says:
Woo, I've been waiting for a thought forum on Monopoly the game itself. Anyway, I personally don't think that Monopoly plays like...well, a monopoly, as many other people think. For one thing, there are no few firms (us) in which we have complete control over the market--instead, a large chunk of that power is distributed amongst us, the firms in the game. In this way, I agree with Helen, that Monopoly plays more like an oligopoly than anything else. Ah well, all in all it's still a fun game.
Drew Venkatraman says:
I will take your money if you play me in monopoly. Monopoly is truly like a real monopoly, it allows you to be the boss and control everyone else. But really,what makes the game so sweet is the fact that its not a monopoly at all, but more like a monopolisitic spectrum if you will. In the beginning its purecompetition, the prices are low, they are set, and everyone starts out with nothing and must build their empire. Then monopolistic competition occurs while people accquire more and more goods, finally I think it ends with oligopolies becuase although one person ends up winning, usually people quit before then so its more like there a few firms competing. Finally i think you could add in the economies and diseconomies of scale. When you start out you cannot buy capital (aka houses and hotels) or anything else and at the end eventually, you become so good (like I usually do;) ) and then you have no idea what your other hand is doing (which is sometimes when i end up losing).
Trevor Sun says:
Monopoly the game and real a monopoly are very different. As most of you have already stated the game version is more like an oligopoly. Instead of there being just one firm there are many and the power each firm has in setting the market price is equal to one another. Also, I;m still puzzled on how one wins this games because every time I play it we never finish it.
Jo Lo says:
I agree to the fact that Monopoly is more of a game of luck than skill. It's pretty easy, you just roll the dice and move forward spaces and collect money (or lose money) along the way. It would be oligopoly in a way because there are multiple players that influence and compete against each other. Monopoly would happen at the end when the winner is decided and he or she is rich and becomes a snob because he/she had outlasted them for 5+ hours and would be bragging about it.
Annie Sung says:
HAHA Helen, I like your idea of "oligopoly", it does sound a lot more interesting than Monopoly, but I think the point of the game is to make it a monopoly, YOUR monopoly. Although I've never really thought about economics while playing monopoly until now, I feel like there's also a mathematical factor to the game. I agree with Jolo that monopoly depends a lot on luck, but there are certain tactics that I've seen here and there using the probability of most rolled numbers and investing in corresponding properties. However, I do feel like oligopoly would be a more suitable name for the game while it's being played, as all the players depend on each other's property and chances to try and win.
Kevin Yeh says: well the point of monopoly is not that there IS a monopoly per se, but that you are trying to ACHIEVE a monopoly through various actions. So although it is an interesting idea to call it an oligopoly, because that's what it appears to be, it doesnt change the nature of the game and so it doesnt really require a change of name. And yunqi, I have indeed ended a game in which someone comes out victorious and in total control of the market, eg a pure monopoly.
Mina Song says: well... may be the game of monopoly is to have fun rather than learn any economic idea of monopoly. But, to win the game isn't player should become a monopoly, i mean to win the game one person should have most of the land. May be it isn't a pure monopoly, but others have barrier of ATC. A player who has fewer lands will spend more money while he moves than earning. Therefore, this player have barrier of buying buildings and hotels. itsn't it?????
Jessica Chiang says: Haha. Isn't it basically impossible to become a pure monopoly? I mean, you would have to own EVERYTHING, which means that the other players would just be...rolling the dice and doing nothing. I guess you can technically have monopoly power over the utilities and the train stations. Is there a concentration ratio for monopolies? Like, if you have 80% of the market you're a monopoly? Isn't that what the frisbee market is like?
Kai Lin Fu says:
Well if there are substitute goods, then you wouldn't be a monopoly. Are there any substitute goods in the frisbee market?
Pure Competition:
Chan Min Park says: Everybody mentioned already, Pure Competition is good for society. In the long-run equilibrium, the firm is efficient, both productive and allocative (as seen by the P = MC = min. ATC) At any output lower than the equilibrium output, there is going to be an efficiency loss (deadweight loss), and therefore at the equilibrium output, the producer and consumer surplus is maximized. However as we know, this does not really exist, but it is something society strives for. Also as jee won mentioned, since there is limited resources, that is what makes firms efficient. I see why society wants pure competition, but as Katherine mentioned, why would firms want it? In the short-run they might gain profit, but in the long run, its just economic profit.
Christina Hu says: We learned in class that pure competition is something society should strive for, as it creates maximum efficiency. But, seeing as how there are limited resources, wouldn't pure competition actually be bad for the economy, the study of which, is, after all, the study of how best to use what scarce resources we have, since the unlimited number of firms would put a huge strain on said resources?
Caleb Liao says: Uh... no. A purely competitive industry doesn't only acheive maximum resources efficiency, it also creates an industry that only has a set amount of sellers within. There would never be unlimited amounts of sellers because like you said, there are like limited amounts of resources and on top of that there are limited amounts of buyers therefore if there were unlimited sellers, not everyone would be earning money, even if they sold at the market price. So the purely competitive industry takes care of any excess amounts of firms within a market by forcing them out through losses in profit.
Margaret Liu says: I'm not sure I totally understand what you're trying to say, but how would efficiency be bad for the economy? Do you mean the environment? If we have scarce resources then we should obviously try to make the most of them.
Jenny Kim: Pure competition IS good for both the comsumers and the producers since producers can earn economic profits (at least for a short while). And you're right that it created maximum efficiency; this is efficiency among the resources that are given. Firms do not use more resources than what is given.
Nicole Wong: The whole point of a purely competitive market is to use resources as efficiently as possible. By saying that the resources are being used efficiently, it does not mean that more resources will be used to maximize produce. It means that the resources that firms already have will be used more "entirely" than they were originally. For example, a worker who used to work 5 hours a day now works 9 hours. There would not be an added strain on resources because there doesn't necessarily have to be an additional amount of resources used by each firm.
Katherine Yang: But isn't pure competition not something firms want? Firms want an economic profit, even though, in the long run, it's not going to benefit the firm because the imbalance is going to right itself from new firms joining the market. Society want pure competition because it ensures maximum efficiency and that profits are equal throughout the industry and that no firm gets more than it needs.
Michael Chow: Without a doubt Pure Competition is good for society as a whole, especially for consumers. Remembering that in a Purely Competitive markets producers maximize their effeciency with the use of both, Productive Effiency and Allocative Effiency. In this case firms or producers find the least costly method in producing goods for consumers, because of the competition with other firms.
Jeewon Oh: As Michael said, Pure Competition is definitely good for the society. I see what you're getting at, Christina, but limited resources would not make pure competition bad for the economy. Pure competition is all about efficiency, and being efficient is making the utmost out of what we already have. And scarce resources and unlimited number of firms is what makes this all efficient. If there were unlimited amount of resources, there would not be any competition, and therefore no efficiency. I don't know if I really understood your question though (;
Richard Tu: Christina said “since the unlimited number of firms would put a huge strain on said resources?” This is true because resources are scare, and thus if a firm wants to stay in the industry, they will have to be efficient and use the resources wisely. In pure competition, there is freedom of entry and exit and therefore firms that are not efficient will have to exit the market. Thus, in order to survive, productive efficiency and allocative efficiency will set in making firms will be as efficient as possible, benefiting the society. Technically the number of firms in the industry are unlimited, but there is really limited space for firms to exist and survive in.
Soyeon yoon says: I think Christina has a point there when she says that unlimited number of firms would put huge strain on resources. Eventhough pure competition raise the efficiency and try to make the best product out of it, in the process of doing that actually an "unlimited" amount of resources will be used and that could be actually a waste. HOWEVER, still without competition the utmost product cannot be made so I guess there should be a middle point to solve this problem from happening.
Serena Tu: For pure competition industries to survive, they must achieve allocative and productive efficiency. If they don't use their resources effectively to achieve the maximum output, then they might have to leave the market, since they are not making any profit. probably won't even be earning the normal profit.
Jessica Chiang: Well, new firms wouldn't choose to enter the industry if the costs are too high. Christina, you said that resources would become scarce. If they were scarce, it would mean that their price would increase. Not many firms are willing to enter the industry if their explicit costs are high. They might not profit from entering the industry. Also, firms in the industry might leave if they aren't making a profit. By the way, what is an example of a perfectly competitive industry? Ms. Close said that agriculture isn't exactly perfectly competitive, and that perfect competition is really rare in our society.
Chris Seah:In response to Jessica's query about an existing competetive industry... the whole idea is only a theory that we can approach. Like Ms. Close has covered, the Agriculture industry comes closest to this ideal. Also, I have read that the stock market, excluding large insitutional banks, represents this idea quite well. I guess that when anything has the word "perfect" in it, it's more of an idea as opposed to a reality.
Kevin Ma: I agree with Chris that it is just an idea to follow, like a guide. The business can not be perfectly competitive because it will lack some of the requirements. Another example of a close to perfectly competitive market is eBay. Because in eBay, there are almost no entry barriers to sellers and there are many potential buyers. Also the buyers can influence the price.
Jessica Ng: Back to Christina's point about how a perfectly competitive market is "bad for the economy." That I believe, is not true. You brought up a good point that it might put a strain on the said resources. But then again, these resources are already strained. There are limited resources for our unlimited wants. In a perfect competition, it is because of the fact that so many firms are competing against each other in maximizing profits with minimal costs that all the "right" goods are produced to the best quality. This relates to Adam Smith's "Invisible Hand." As firms seek to further their self interest, the invisible hand organizes these private interests in a way that is in sync with society's interest in using scarce reources efficiently. Consumer and producer surplus is at a max in a perfectly competitive market. There is no other way to use these resources any more effeciently. Any types of markets that are not purely competitive (which is the case for virtually all the markets realistically) thus is not 100% allocatively effecient with the resources at hand. Therefore, resources in a competitive market is not "strained", but rather, handled in the most effecient way possible.
Charlie Gao says:
I was wondering. In the long run of a perfectly competitive industry, there are no economic profits being gained, only normal profits. Does that mean that there is no producer surplus? Because you're only selling things at the lowest possible price, thus gaining no utility. Anyone agree or disagree?
Chris Seah: I disagree with you, Charlie. The non-existence of economic profits does not necessarily take away producer surplus. If you look at your typical P.C. Industry graph, as long as demand and supply are down-sloping, there remain areas of maximized producer and consumer surplus, since everyone is forced to sell at the market price.
Kevin Chiu says:
I wouldn't say that no utility is gained for a firm in a perfectly competitive industry, as if normal profit is satisfied, the firm must have some utility as they are earning what they value themselves as; therefore, firms that gain normal profit gain enough utility to give them an incentive to stay in the industry. In additoin, just because a firm sells things at the lowest possible price doesn't mean they're not gaining utility.. I don't see the relation between those two.
Howard Lin says: In real life, there is no perfectly competitive market structure, because even though one of the major charactoristics of pure competitive markets is it's ZERO barriers to entry, there's stuill ought to be some kind of money needed to start a business.... (:
Jonathan Lau says: Just because there is no economic profits being gained from a perfectly competitve industry does not mean that no utility is being gained either. Like Kevin said, there must be at least some utility gained from a normal profit, or else there would be no incentive to remain in the market. And like Chris said, It is important to take into account that in a perfectly competitive industry, everyone is forced to sell at the market price.
Angel Liu says: Actually i think there is a perfectly competitive market--local vegie market. There is no barrier of entry, and since every vendor sells the same vegie, they must all sell their vegies at the same price. Although they might not be earning economic profit, they are exchanging foods between each other so they are sufficient to survive. I guess that's why farmers in the countryside are naive because they don't ever have to compete; everyone gets their share of foods if they are willing to work.
Monopolistic Competition
Emily Yeh says: So if most of the industries that we can name are largely oligopolist, then what is an example of monopolistic competition? Like, would the shops at Yuyuan or Xiang Yang market be more pure competition or monopolistic competition? Afterall, the products they sell are identical- but it seems that the demand curve wouldn't be a straight line. For instance, the locals perhaps have a lower price line than would the foreigners the sellers try to earn larger profits from. In this case, are they "price takers" or "price makers"? Or is this a case of price discrimination in monopolistic competition?
Dana Yeon says: It is absolutely true that the locals have a lower price line than the foreigners. This is partly due to the fact that the foreigners are blissfully ignorant of the actual prices of fake items at those markets. Thus, it is true like you said that the demand curves are not straight. In fact, they are two distinctively separate lines, each representing the different limits of the consumer surplus. Thus, the idea of price discrimination is employed by the storekeepers even though such shop keepers do not represent monopolists as the goods they sell are widely dispersed and fairly homogenous. The shop keepers are willing to sell their items for higher prices for those with higher consumer surplus limits and make profit; they are also fine with making profit by selling their goods for cheaper prices to sensitive consumers. In the end, all is okay as they enhance their profit.
Hansen says: Interesting discussion so far! I think that another example of monopolistic competition would be the convenience stores around Shanghai. There are plenty of franchises but also the easy ability for entry by simply opening your own. Most products sold by the stores are the same but like the YuYuan/Xiang Yang example provided by Emily, the curves may be different here based on other factors such as location.
Tim says:
really? I actually think that there are more examples of monopolistic competion in our everyday lives. Yes the sellers in Yuyuan would be more of a pure competition. In monopolistic competition, firms try to distinguish their goods. That isnt really the case with shops in Yuyuan or xiangyang. Also i would have to disagree with you on the convenience stores Hansen. As far as i know, there are only 3 or 4 convenience store companies. Yes there may be lots but they're still owned by a larger firm.
Nicole Wong says:
I think it's right that there's mostly monopolistic competition in our daily lives. Seeing as pure monopoly isn't actually possible, a lot of the markets these days have purely competitive aspects, but not as exteme. I can't help but think, however, that there are more monopolistic firms than we think. For example, most people hadn't realised that we have one right in our school (Eurest). Are monopolies more common than we think?
Claire Moon says:
I agree with Nicole's point that most of the industries in our daily lives are monopolistic competition. It is easier to find monoplolistic competition than to find pure monopoly in our lives. For example, electronics companies such as Sony, Samsung, Toshiba, and LG are monopolistic competitors, and they are easy to find around us while purely monopolistic firms like Eurest (in our school) or local facilities such as power supply plant are hard to find in our daily lives.
James Tsao says:
Man, most of the industries in this world are in a form of monopolistic competition. For example, restaurants are monopolistic competitive since the food they serve are differentiated, entry and exit are relatively easy but not as easy as pure competition, and demand is highly elastic. It is impossible for restaurants to collude because there are too many restaurants out there, and in the same time, every one of them performs independent action because each restaurant can set its own pricing policy without considering the prices of every other restaurants in the region.
Rebecca Sung says:
Well the big thing in monopolistic competition is branding. Like Claire said, the electronic companies are monopolistic competitors. When you buy a television set, usually the tvs have the brand name right in the front. I was actually thinking of car companies being monopolistic competitors; lots of producers of cars and each one is branded. Mercedes with that circle cut into thirds, BMW with its blue, black, and white logo, Honda's "H", etc.
Kevin Ma says:
Wouldn't the car industry be Oligopoly? Since there are many barriers to entry such as just getting the capital is hard. Such as finding space, money, materials, and getting a factor. They also have power over the price of their cars. For example, Ferrari can charge like 500,000 for one of their cars while Toyota charges 30,000.
Jo Lo says:
I agree with Kevin, the car industry leans more towards being an oligopoly rather than a monopoly. But the brands you find more is different around the world. In the US the majority of car brands you'd find would be Toyota, Ford, Mazda, etc. Here in China, most cars are made by Volkswagon, and a few BMWs and Kias. It all depends on where in the world you are.
Trevor Sun says:
I agree with Kevin, the car industry is more of an oligopoly than a monolistic competition market. It has more traits of an oligopoly in my view, for example the heavy advertising, competition and the few main firms in the market such as Daimler, Honda, etc. However there is more than just a few firms in this market which is the only thing I can think of right now that makes the car market not and oligopoly.
Cassy Chang says:
In response to Nicole's point about Eurest being a monopoly, it really depends on the context. Within our school it is, but there are other companies in competition within the market, for instance SAS used to have Sodexho instead of Eurest. And yes I think most of the industries are monopolistic competitive firms, i mean look at the hundreds of brands of products that are available!
Mond Gu says:
I agree with Cassy that it depends on how we look at Eurest to determine whether or not it is a monopoly. In our school it is the monopoly of selling us food, but it is also in competition with other companies like Sodexho who mainly do cafeteria. I also agree with Kevin that the automobile industry is an oligopoly.
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