The Midol Monopolist

A student writes that she became a monopolist in her freshman dorm — hoarding Midol to sell to her dorm-mates at the time each month when dorm-mate had a quite inelastic demand for this product. She also realized that at that time, there is an increasingly inelastic demand for chocolate-chip cookies, so she hoarded and sold those, too. She correctly notes that the two goods are complementary over time — more of both consumed on some days than on others. But I bet that over a short interval, they are substitutes — the satisfaction from one reduces the demand for the other. This illustrates how we need to think about the time dimension of consumer choice. I would also bet that her monopoly doesn’t last long. Anybody can bring the two products to the dorm and sell them — there are few barriers to entry. A better description is that she’s an innovating entrepreneur in what inherently will be a competitive industry.

(HT: A.S.)


164

Was I the only one wh had to look that one up?

Francesc

No, you weren't

Ashley

While the logistical barrier to entry may be low, the social implications of snubbing a friend or popular dorm member by selling similar goods at cutthroat prices may deter competition. Peer pressure and all that.

Enter your name...

It doesn't have to be "cutthroat" prices to be profitable. A large box of name-brand ibuprofen runs about 10 or 15 cents per pill. If you only want a couple of pills, it is less total money to buy a couple from your roommate for $1 than to buy your own bottle. Both parties could be equally satisfied.

(Lesson for parents whose daughters are headed to college: Save money by sending a bottle of ibuprofen with her. Advanced lesson for daughters: Ask for a big bottle, so you can be the entrepreneur, not the customer.)

pawnman

What, exactly, prevented the roommate from buying Midol and chocolate chip cookies from the same store, cutting out the middle-woman?

Mike

What stopped them? The laziness of college students knows no bounds. And doubly so for those that are already physically uncomfortable.

mannyv

Economics always assumes that there are always entrepreneurs clamoring to fill a market niche.

In fact, there aren't. In this particular case someone with a trading bent founded a small business. Until she came along, there wasn't one. When she leaves the dorm or loses interest, I'm pretty sure the business will go away.

Not everyone wants to run a business, no matter how small it may be.

Erik Jensen

This is a great way to avoid making friends. This woman would probably be better off if she gave away the Midol and cookies. Then when she needs a fake id, lock picking skills, pirated music, or homework answers, the other people in the dorm won't turn around and charge her for these things.

Definitions

". . . she’s an innovating entrepreneur in what inherently will be a competitive industry."

Isn't it already now a competitive industry, in a way? If we define the freshman dorm as the marketplace, do we define those living in that dorm who are self-sufficient (i.e. get their supply from elsewhere and don't have to enter the dorm market for it) as competitors, or not? By being self-sufficient, they deprive her of potential customers, with the same result any successful competitor would have on her profits. Can self-sufficiency be called competition?

What if, like in Wickard v. Filburn, 317 U.S. 111 (1942), the self-sufficient student has more supply than she personally needs, and could if she wanted (but doesn't want) to sell her excess. Then, is she a competitor? Or is that confusing economics with law (in that they may use the same words, but the meanings aren't always the same)?

I guess you would define the marketplace as: at point X in time, it is all those females who lack supply to meet their need, thereby eliminating through definition all self-sufficient females.

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