ShmoopTube

00:00

And finance Allah shmoop What are Olongapo Lease and Ola

00:06

GOPs unease All right people you've heard of monopolies you

00:11

know like this guy It's where there's on ly one

00:13

option for a particular service Like only one place Tio

00:17

by it for example The waterworks Yeah the electric company

00:20

maybe certain railroads You know if you don't live near

00:23

a train huh Yeah You know we're looking at you

00:26

Okay So those air monopolies What's in Olongapo Lee Well

00:30

let's take a brief detour to ancient Greece We'LL hit

00:33

New play by Sophocles is burning up the box office

00:36

Nude wrestling is popular and there's a couple of words

00:39

will want to be familiar with We've got mono which

00:42

means one or alone as in monotone Ah monolithic and

00:48

monogamous We've also got old leg which comes from the

00:51

Greek Oly ghost It means few monopoly means one place

00:56

You can buy stuff like the electric company waterworks in

00:58

the Microsoft operating system in the nineteen eighty nine So

01:02

Oleg op Aly means there's a few places you can

01:05

buy that thing It's better than a monopoly for the

01:07

buyer in terms of competition but it's not a fully

01:10

competitive market either Like you live in a small town

01:13

way out in the desert There's nothing else around for

01:15

at least a hundred miles There's one gas station in

01:18

town in that gas station Well basically has a monopoly

01:21

on all the local business Basically whatever that gas station

01:24

wants to charge for gas well you'LL have to pay

01:26

it You don't have anywhere else to go After a

01:28

while someone else opens up a second gas station Now

01:32

there's two places in town and now you've got the

01:35

beginnings of an Oleg op Aly The gas station's compete

01:38

on Price It's still not perfect competition Both stations have

01:43

good pricing power because well they control so much of

01:46

the market But they keep each other in Check their

01:49

sort of duopoly if you will A lot of cities

01:52

have oligopolies in grocery stores A few brands will have

01:55

locations in an area but competition's pretty thin on a

01:58

national scale True oligopolies or hard come by and still

02:01

some industries have virtual oligopolies like cell phone service for

02:05

example right we have Verizon and tea and just a

02:08

handful of other smaller providers exist But generally speaking people

02:12

are forced to choose among the big players Right Eighteen

02:15

Bryce and Sprint maybe T Mobile You know guys like

02:17

that computer operating systems or another biggie you could load

02:20

up on one of those crowd sourced operating systems that

02:24

you're weird basement dwelling cousin prefers But in practice you're

02:28

almost certainly going to use Microsoft and or Apple and

02:31

that's about it Often end up with an oligopoly There

02:35

needs to be significant barriers to entry in a market

02:39

Well these barriers of entry can take the form of

02:41

high fixed costs to get into it like cost a

02:44

billion dollars Teo make an oil rig or a billion

02:47

dollars Teo make a billion lines of code and operating

02:50

system or something like that Or you have to get

02:52

a government license like for a broadcaster to do it

02:54

or to build a bridge that takes tolls If that

02:57

can be private or maybe make a parking lot or

02:59

something you have to get the town's approval Your favorite

03:02

pet ferret Mr Pillows Bright then dies You loved him

03:06

You don't want a new fair If you want another

03:08

Mr Pillows bright so you decide to clone him well

03:11

There are three pet cloning companies to choose from Copy

03:15

Rover Ink Me Al Again Corp and Trans Jean rendering

03:19

Reina plaques limited You go with trans gene because well

03:23

they have the most scientific sounding name Unfortunately Mr Pillows

03:26

Bright the second comes back with no teeth and purple

03:29

for when you complain while the guy it trans gene

03:31

says Well you should see some of the monsters they

03:34

make over a copy Rover and yell again Consider yourself

03:37

lucky dude And obviously you're not happy with the results

03:40

but you don't have a lot of choice You're stuck

03:42

with the old leg op early so you decide you

03:44

want to break up the Oleg Awfully by starting a

03:46

new competitor A fourth player in the market problem one

03:50

that cost you Khun barely afford the special ferret food

03:53

for Mr Pillows Bright the second to gum at with

03:56

his you know toothless chewing A new cloning machine cost

03:59

millions of dollars high barrier to entry not unlike the

04:03

cell phone companies with both expensive cell towers they put

04:06

up and government approval they need or the operating systems

04:09

that makers have you know their products preloaded onto millions

04:13

of computers And yeah that doesn't work either So problem

04:16

number two starting your own pet cloning business Well government

04:19

regulation Minor detail Congress recently passed the Freedom and Truth

04:24

in Animal Cloning and Patriotic Apple Pie Act along with

04:28

raising taxes on apple pie and approving funds for a

04:30

new long reign stealth bomber The law requires all animal

04:34

cloning facilities to obtain a license from the FDA Well

04:39

copy Rover Miao again in Trans Jean All have licenses

04:42

already You don't Their lobbyists are now swarming around Washington

04:46

whispering all kinds of negative things about you to make

04:49

sure nobody else gets a license Yeah that's another barrier

04:52

to entry So those air all Oleg Op Elise now

04:55

onto holy gaap Sinese You've still got that bit of

04:59

Greek swimming around in your brain right You'll guess this

05:02

term represents another situation where a few companies are involved

05:06

while you're right there But in this case they aren't

05:08

selling They're buying And ola gops Any refers to a

05:12

situation where there are only a few buyers for a

05:15

product Like for those nude pictures you have of Warren

05:18

Buffett wrestling Bill Gates All right well in the real

05:20

world The classic example comes from the defense industry and

05:24

the aerospace industries Right If you build stealth bombers or

05:27

solid rocket boosters you really don't have a whole lot

05:30

of choices in who to sell to This guy might

05:33

be rich but he's not rich enough to buy a

05:35

stealth bomber and this guy might be really rich But

05:38

he's not rich enough for a rocket ship and all

05:41

right well maybe this guy is But generally the market

05:43

is very small for buyers of that kind of stuff

05:46

So you're basically selling to a couple of the Richard

05:48

governments in the world and the mostly really just the

05:50

US depending on whatever laws are in place that further

05:53

limit your options and selling your wares All right so

05:57

quick Review Olonga please Or a few companies that dominate

06:00

a market unlike a monopoly where just one he's usually

06:04

come up because of high costs of entry and or

06:06

some big skill and or some kind of government licensing

06:10

that's applied to make it hard for any competition to

06:12

come in The market works better than a monopoly for

06:15

the buyers but doesn't have the characteristics of a truly

06:18

competitive market like if there were eighty sellers and they

06:21

all competed vigorously for price Meanwhile Enola GAAP Sini involves

06:26

a market where there are only a few buyers Like

06:28

typically these air high cost items or items limited by

06:31

regulations Think defense military rockets all that kind of stuff

06:35

Yeah or could be items with a very very specific 00:06:39.093 --> [endTime] market No

Full Transcript