Search the Site

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.