The group originally agreed to have sole control over Miami and New York and share Los Angeles among the two separate gangs, but it appears that independent members have been poaching areas from one another. The strength of a cartel is in their ability to self-regulate and to not over produce. Cartels have the ability to operate like a monopoly, but only if they’re stable.
Shameless — Hipsters in a Bar
In this clip you see a bar that’s on the South Side of Chicago. The bar is usually dead but very recently “hipsters” discovered the bar. They thought that the snide Russian bartender and expensive drinks made the place different and appealing to them. This bar serves cheap low end alcohol and in the video you can see price discrimination happening. The prices start to change and become higher when the bar serves the hipsters because they are able to pay those high prices versus the people from south side that can’t. The hipsters are also not realizing they are being scammed when the low end vodka is put in a more expensive brand’s bottle.
Thanks for the clip and summary Fiona Brandman!
Adam Ruins Everything — Eyeglass Monopoly
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.
Eyeglasses in the United States can cost hundreds of dollars and that’s probably because 80% of glasses are manufactured by one firm under different brand names. Because they produce both luxury and basic brands, they are able to raise prices well beyond a more competitive price. Luxottica even owns many of the sunglasses stores, which gives them buying power over inputs.
Two and a Half Men — Massage Competition
Alan needs some extra income and decides to offer massages at the mall. He quickly finds stiff competition and gets into a price war with another masseuse. The price war eventually gets so low that the entrant decides to exit the market.
You’ve Got Mail — Monopolistic Competition
Struggling children’s bookstore owner Kathleen Kelly (Meg Ryan) tries to remain positive as a big retail chain bookstore, Fox Books, opens around the corner. She outlines the differences between their products and services and notes how this could be a good thing for her business. When business try to differentiate their products, they are often operating in a monopolistically competitive environment. The one issue with the entrance of a new competitor in these markets is that it decreases demand for the other firms even if they are a little different. The accountant notes that their revenues are down compared to the same week last year.
Thinkbox — Every Home Needs a Harvey
How do you differentiate yourself from the other dogs in a dog shelter? You show off all your skills, of course! Harvey does a great job differentiating himself from his competitors in order to win their business.
The Little Rascals — Two Pickles
You don’t like pickles, but your friend does? That works out well for these two as Buckwheat buys Porky’s pickle from him for 2 cents. What a quick example for a mutually beneficial transactions.
The Informant — Price Fixing
The Informant tells the story of price fixing in the lysine business by American and Japanese businesses. Matt Damon plays the undercover witness who uncovers the scheme for the US government. This is a great movie to theme the cartel/collusion discussion for class.
Pixar — One Man Band
I use this clip to introduce the concept of monopolistic competition in a market place and how demand shifts when close substitutes enter a market.
Senator Alesi — Zone Pricing for Gasoline
Senator Alesi discusses a practice known as zone pricing whereas oil companies charge different prices to gasoline station owners depending on how affluent the surrounding area is. This leads to differing gas prices for citizens across the city.