Archive forNovember, 2014

Let It Go … Or Don’t?

Many of us are familiar with one of Disney’s most recent hits, ‘Frozen.’ It seems like stores sell ‘Frozen’ themed anything to appeal to fans, especially young girls. While it is easy to see that the movie, characters, and stories are very popular, it is more interesting to look at it from an economic perspective.

Disney manipulates the market because it owns ‘Frozen’ and everything associated with it. Disney essentially has a monopoly on Frozen products. Other companies cannot make Frozen products without giving credit and money to Disney. Disney is making the most of this market power by making regular products Frozen products to appeal to their audience. The article says Disney is producing Frozen vacations, clothing, food, and performances. Because these products are purchased by parents and adults for children, there is a high demand for them. It is very interesting that this is a trend that Disney has been following since 1929 with the first product being a tablet with a Mickey Mouse logo on it. It has obviously blown up since, if you think of all of the Mickey Mouse products still being sold to this day.

Disney has a very powerful monopoly because of the patents and rights on their products. Disney makes more revenue from the movie products than from the movies themselves. Who doesn’t own a Disney plush character, movie, or product?

After learning about the concept of monopolies, it is interesting to take a step back and see one so clearly in front of me. As a very passionate Disney fan who buys into their magic, I know they’ll have market power over me for years to come.

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Cassie 3rd Blog Price Discrimination

http://www.forbes.com/sites/peterubel/2013/12/12/whats-fair-about-price-discrimination-in-pharmaceutical-markets/

This articles talks about DVD companies pricing their products at the right price according to demand. The article explained that in places like US they could sell DVDs at a higher price because of the market but when trying to sell to cother countries that sold their products at lower prices. In order to make sure that the Americans weren’t getting cheap DVDs from other companies they manufactured DVDs that only worked in that one question. They then relate this example to a more complex example of pharmaceutical drugs. It doesn’t cost a lot to make some drugs so the companies can sell them cheap in countries that can’t afford as many and still make profit.

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Halliburton, Baker Hughes Merger

The focus of this article is on the upstream oil industry specifically regarding extraction and exploration. Halliburton and Baker Hughes as the title of this article suggests have agreed to a “friendly $34.6 billion merger.” This merger has was designed to offset the market power of the company Schlumberger. Schlumberger is considered to be the “leader in oil field services.” These three companies produce the equipment used in hydraulic fracking an industry which has recently exploded in the United States as the mining of natural gas has become more economically viable. The main reason I present this article is because of the possibility of an anti-trust lawsuit to follow this merger. This market is currently an oligopoly and with this merger has the potential to develop into a duopoly. To avoid an antitrust breakup Halliburton has begun selling off some of its businesses. In the event that Halliburton is prosecuted by an antitrust suit they would face fees of up to $3.5 billion.

 

http://dealbook.nytimes.com/2014/11/17/halliburton-to-buy-baker-hughes-for-34-billion/

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Labor and Education

I came across an interesting article on the New York Times website discussing the problem of finding skilled workers in Nevada. While the state is known for its casino industry, a new industry is being introduced by Tesla, a company that produces cars powered by batteries.  Nevada offered incentives to Tesla to produce more jobs and attract the company to the state. There is a concern however that there will be a lack of employees for Tesla. Nevada is the state with the least amount of workers in STEM fields; the state is trying to change this by encouraging local colleges to offer courses in fields that would prepare them for jobs like the ones at Tesla.

This article sparked my memory about what we were talking about in class: the relationship between education and the labor market. In Nevada the supply of workers in the STEM fields is lower than the demand, thus resulting in a shortage. The shortage could be solved by hiring out of state workers who are willing to commute to their jobs, which would not benefit the people of Nevada but the commuters.

Another factor associated with this problem is that employers are not willing to lure employees, would rather spend money on technology and part time workers, and do not want to lose the time and money needed to train employees.

The best solution to this problem is to start incorporating strong STEM backgrounds into education; by providing students with a breadth of knowledge from the beginning, they would be more likely to pursue careers in this fields. This would increase the supply hopefully until the point that the amount of workers supplied is the same as the amount of workers demanded.

http://www.nytimes.com/2014/11/15/upshot/nevada-provides-test-case-in-debate-over-a-skills-gap.html?ref=economy&abt=0002&abg=0

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Price Ceilings on Gas

Gas Price Ceiling at $4.15 Predicted is an article published by The Washington Times that clearly highlights the concept of price ceilings. Price ceilings are generally maximum prices established by the government that may create shortages, deadweight loss, misallocation of resources, wasteful lines and other search costs, and reductions in product quality. That being said, this article portrays this concept and its effects through its focus on gas prices. Although the government does not know the exact gas circumstances of the future, it “predicts a price ceiling at $4.15.” If the government were to go ahead and establish this price ceiling now, so that prices wouldn’t continue increasing, the industry would be prone to shortages, which in other words would create a missing signal to produce more gas. Such a risk is only one of the five I previously mentioned. To sum up, without having accurate information of the future market of gas, I believe that there should not be a price ceiling on the good at least for now.

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Price Discrimination in Higher Education

How Colleges Discriminate With Price, And Why They Must Stop is an article published by Forbes that clearly portrays the concept of price discrimination. To start, what is price discrimination? Price discrimination, according to the class text, is the “selling [of] the same product at different prices to different customers.” That being said, such an idea is seen in this article through the example of college tuition. When it comes to managing expensive private college tuitions, families with a rather low annual income are at an advantage when compared to wealthier families. Families with low income in certain circumstances, have the option of paying half or less of the established tuition, due to their critical finances. While, families with higher annual income do not have such an option and can only hope to receive “merit-based aid” to reduce their costs, as the article states. Therefore, although to one such may seem fair, as lower income families simply cannot afford to pay all of the great expenses of a college tuition, there is a great presence of price discrimination as tuition costs are different for specific “customers.”

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External Costs of Texting

The Pros and Cons of Texting, by Kelley Loftis, is an article that truly demonstrates the external cost of texting. Overall, the commodity of texting serves as a great advantage as it allows individuals, especially teens as the article emphasizes, to communicate with friends and family in a fast and non-disturbing way. Instead of interrupting a class with a phone call, for example, teens and adults could simply send a quick text. However, the various consequences of texting are often ignored or not taken into consideration. Texting can be done anywhere which can sometimes serve as a great disadvantage. Particularly, when the act of texting takes place while driving there is a major external cost. Texting while driving puts not only an individual at risk of death but also, pedestrians and other drivers on the road. Texting distracts individuals easily as a single word typed through text requires one’e eyes off of the road, which often results in ugly situations. In fact, the article implies that teens are most prone to texting while driving and therefore often face the consequence of death or serious injury. To sum up, texting may seem like an external benefit to teens, especially, as it is convenient to them under certain circumstances, but the fact of doing it at the wrong place and time could result in the death of the individual and others makes it a great external cost.

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Possible Merger Between Giants

The cost of crude oil has been falling throughout this year, which to many Americans is a relief compared to the prices from several years ago.  However, a possible merger between Halliburton, and Hughes could stop this from occurring.  As both companies are some of the major players in the oil market, especially in the United States.  They control a large portion of the oil shares in the U.S.  Many other oil giants are thinking along the same lines to merge, however with a merger this large it would be very easy for price control in the United States along the oil market.  Which is expected to cause a lot of concern for anti-trust issues, and other large corporations run between the two companies.  Such as the cement market, where they are the only two large companies.

http://www.forbes.com/sites/lorensteffy/2014/11/14/will-halliburton-baker-hughes-deal-spark-more-mergers/

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Competitive Holiday Season Looms Ahead

Walmart is the world’s largest retailer. Despite this, the company still has fierce competition with other firms such as Kohls and Target. Though Walmart reported a quarterly upturn in sales when matched against comparable firms, it still has much to worry about. More so than ever, Walmart is feeling the effects of online shopping. There is an intense rivalry between Walmart and online firms such as Amazon. This worry is increasing as we approach the holiday season, a season in which sales are at their peak. To combat this threat, Walmart is instituting a price match feature at all 4,300 U.S. stores. Essentially, if shoppers can find a product for a cheaper price online, Walmart will match the price in stores. Sales in stores have been rising, but the increase has been primarily limited to home goods, health, and apparel departments. Many of the objects that are true luxuries are being bough online, and Walmart wishes to change this before the holiday season is upon us. So far this method seems to be working. Walmart’s total revenue has increased by 2.9%, bringing it to a total of $119 billion for the 13 week quarter. In comparison, similar firms only experienced an average increase of 0.5%.

This is a great example of a competitive market. Though it is not for a specific product necessarily, these ‘super stores’ as a whole can be directly compared. They are in constant competition and utilize the strategies of other firms to increase their own profits. I find it very interesting how the online market has a direct impact on the sales in physical stores, and what various firms are doing to counter the loss of sales. It will be interesting to look at the numbers after the holiday season and see if this strategy truly works. From a consumer standpoint, it seems like a good deal. You can buy a product for the same price as online without paying and waiting for shipping. I am excited to see if Amazon and other online retailers bring about a new deal to counter Walmart’s latest move.

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Net Neutrality

This article details the ideas of net neutrality. I found this article interesting because I could draw connections between the idea of big name companies trying to take control of different facets of the internet and monopolies. I also saw the idea of the government using the FCC to protect consumers relating to price controls. The government is trying to stop these new age monopolies (Comcast, Verizon, etc.) from completing controlling the market and forcing consumers to make tough decisions when it comes to the internet.

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