Aliens and Cat-Food Monopolies

In the movie District 9, the aliens (prawns) have developed a tremendous addiction to cat food. A Nigerian gangster lives in the prawns’ preserve and has a monopoly on the sale of cat food to the prawns. How can he maintain his monopoly and what barriers are there to entry by other sellers?

Simple: the prawns are not allowed to leave the preserve, so they can’t buy from sellers elsewhere in Johannesburg. Every seller must live near them. Since the Nigerian cat-food sellers are heavily armed, quite literally no competitors can enter the market (the preserve). Some barrier to entry, either natural (economies of scale) or artificial (as in this case, with restrictions imposed on both buyers and potential sellers), is required to enable the monopolist to keep price above average cost. As is so often the case in a monopolized market, the restrictions that generate monopoly power result at least partly from government action.

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  1. Jonathan says:

    “As is so often the case in a monopolized market, the restrictions that generate monopoly power result at least partly from government action.”

    This statement is meaningless. All markets exist in part due to government action.

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  2. Nosybear says:

    Uh, sometimes a movie is just a movie…. Anyone want to bet the monopoly was a simple plot device created by the writer with no thought of the economic theory behind it? It’s a lot easier, fictionally, to control the interaction between a group and a monopoly than the interactions between a group and a market, hence the overused, underthought science fiction device of a corporate state holding a monopoly on an addictive drug or a vaccine or a food supply. On one point I agree: Only a government can create an effective monopoly, generally through some mistake or unintended consequence.

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  3. science minded says:

    Dear jonathan;
    What about “the market place of ideas”? As I recall it once said, “no one likes to be in a position of dominance.” George Simmel

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  4. Harry Cheadle says:

    @nosybear: The writer may not have thought much about economic theory directly, but perhaps he took the cat food example from real-life conditions in non-alien slums, where drug dealers can hang on to monopolies by similar methods employed by the cat food dealers. No reason to accuse the writer of laziness. (And the monopoly wasn’t controlled by a corporate state, but by a gang.)

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  5. Nick says:

    There is an opportunity in distribution – someone can make money by distributing cat food to the local gangster at a lower price point. So while a monopoly exists within the context of selling to the prawns, opportunity does exist elsewhere within the market.

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  6. Fred Weiss says:

    Umm….yeah, “Jonathan”, but the specific kind of “government action” referred to in the piece physically bars competition against the monopolist, including most obviously in this instance by the use of armed force. Now, in contrast, another kind of government action could prohibit the use of such armed force. So while it is true that some kind of gov’t action will effect the market, the question is whether such action promotes and protects the freedom of trade or restrains it.

    It appears that Mr. Hamermesh understands that for a true monopoly to be maintained, it will require restrictions imposed by gov’t action, i.e. that the monopolist is given legal protection against competition.

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  7. Dave says:

    Jonathan, really? You sincerely believe that without government, there would not be any of the supply or demand for economic goods that constitute a market?

    Governments are a concoction of human reason. Markets are an inherent expression of the human desire for STUFF, and their existence is completely independent of that of government. Government can only serve to distort markets, and, except in the case of “proxy” goods like carbon credits (or perhaps fiat currency) created by government, the government does not ever “create” markets.

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  8. John says:

    @jonathan: “All markets exist in part due to government action.”

    That statement could not be further from the truth. All that’s required for a market to exists is people – some people can produce a specific good or service more easily than others, so it make sense for people to trade for it.

    There would be markets for food, medicine, energy, entertainment, you name it, whether or not the government told us how it should be run.

    The most efficient markets are the ones with the least intervention. Big businesses love government intervention since they are more able to navigate the “barriers to entry” than small businesses.

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