Seinfeld — Soup Nazi

 

Superior products can provide companies with a short term barrier to entry in a market, but they aren’t usually long lasting. Beyond technological superiority, some companies may have service or quality superiority, as is the case with the Soup Nazi in Seinfeld. Offering a superior product allows the owner to treat customers rudely, offer high prices, and restrict output as he desires.

This clip is available thanks to Economics of Seinfeld.

Stossel — Diamond Engagement Rings

 

In this Stossel segment, we learn about the history of the De Beers diamond corporation and their control of the diamond market. Stossel interviews guests and asks them to identify diamonds from knock-off rings, but most can’t tell the difference despite claiming to be capable.

Adam Ruins Everything — Diamond Rings

One of the textbook examples of monopoly power comes from De Beers Diamond Corporation and their control over the diamond markets since the end of the Great Depression. In this short scene, Adam Conover covers the history on engagement rings and discusses the monopoly power that the De Beers company had in the market.

Adam Ruins Everything is a half-hour informational comedy were host, Adam Conover, debunks popular myths. Each episode is divided into 3 segments with some common theme. In the Spring of 2018, James Tierney and I sat down to go through all three seasons of Adam Ruins Everything to pick out examples in each episode that could be used in an economics course. If you’re curious about the paper, you can read about it here.

Hawaii 5-0 — Product Differentiation

 

In monopolistically competitive markets, sellers offer differentiated products, and this Hawaiian food truck is no different. While some people believe that food trucks should only offer a small range of menus, the chef argues that in order to stand out in such a competitive market that he has to offer variety. Introducing new substitutes will decrease the demand for others and eventually lead to zero economic profit.

Thanks to Hannah Canil for the clip suggestion!

Das Racist — Combination Pizza Hut And Taco Bell

If you haven’t driven by YUM!’s combination stores, they are a site to see. A family of picky eaters can stop by a location and grab a combination (depending on the pairings) of pizza, tacos, fried chicken, fish, or burgers. The combination of stores varies depending on the area, and some even have three-in-one:

pizza hut taco bell kfc

This song (and accompanying picture) can serves a great introduction to the concepts of product differentiation and economies of scope. The YUM! brands have a large presence in major categories in the fast food market:

4. KFC —  20,404 locations
7. Pizza Hutt — 13,728
11. Taco Bell — 6,500

Thanks to Rob Szarka for the recommendation.

CBS Boston — Avoiding Price Discrimination

 

This CBS clip details ways families can avoid being subjected to price discrimination tactics by firm. CBS affiliates across the country started searching for different items around the country to see how varied the prices were. While customers may prefer to pay the same price (an argument for equity), firms can actually improve efficiency by practicing price discrimination.

Life in Pieces — Unbundling the Shoes

 

At their family garage sale, John tries to sell a pair of shoes as separate items. By unbundling the items, he offers one shoe for 50 cents, but the second shoe as $10. He almost gets tricked when the shopped is buying the shoes for her husband who only has one leg, but John tries to quickly back-peddle. This form of price discrimination is the opposite of a bulk discount.

The Toys That Made Us — Two Part Tariffs for Barbie

 

When designing the pricing model of Barbies, Mattel looked to Gillette’s pricing model for razors and razorblades, which is a form of second degree price discrimination that utilizes two part tariffs as a way of maximizing profit from group buyers. The doll (or razors) are sold at very low prices, but the accessories (or razor blades) are the main drivers of profit for the firm. This model allows the company to sell a lot of base products at near marginal cost, but then charge high prices for the accessories, which are a critical component of the overall product.

South Park — White People Flipping Houses

 

Randy Marsh is a local contractor who flips homes in the area. His TV show, white people flipping homes, has come under bad wrap when local Confederates have decided to use his television show to protest the Amazon Echo stealing jobs in the town. Marsh takes the men to court for damages because viewers negatively associate the local Confederates with the show. He’s asked why he doesn’t change the name of his show, but he lists off a variety of other show titles that were already taken. In a monopolistically competitive market, product differentiation is essential to creating demand. Items must be substitutable, but sellers also must try to convince buyers that their product is somehow unique from the competition.

Girlboss — Jacket Arbitrage

 

 

Sophia browses for clothes in a vintage clothing store and finds a jacket she wants to purchase. She bargains for a lower price for the jacket before leaving the store. Later, Sophia decides to sell the jacket on eBay and takes a few photos to try and make the jacket appear more fashionable. While she was able to buy the jacket for only $9, Sophia eventually sells the jacket on eBay for over $600 (the clip stops at $185).   As the show progresses, Sophia continues to sell clothes and starts an online business called Nasty Gal, which is actually still in operation today. This clip is a prime example of arbitrage, where a person can purchase an item at a low price in one area (Sophia at the thrift store) and sell it for a higher price in a different market (Sophia on eBay). In a perfectly competitive market, the price differential should narrow, but because eBay has a much larger customer base, Sophia is able to buy items from the local thrift store and resell them later at a higher price.

Thanks to Elena Montenegro for the clip suggestion!

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