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Finance: What are monopolies and monopsonies? 5 Views
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Description:
What are monopolies and monopsonies? Monopolies are circumstances where a single company or entity providing goods or services dwarfs its competition to the extent that it can control prices for the entire market. Alphabet/Google’s domination of the SEO sector has been accused of being a monopoly. Monopsonies are the reverse situation, where a single buyer of goods or services can drive pricing lower, such as China’s estimated 90% hold on the rare earth metals market.
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Transcript
- 00:00
Finance Allah Shmoop What are Monopolies vs Monopoly Sinese Ah
- 00:10
monopoly that great nineteen Our game control a whole side
- 00:14
of the board build houses then hotels on it and
- 00:16
odds of a competitor landing there to suffer huge fees
- 00:18
are wickedly Hi You take that cash buy more properties
Full Transcript
- 00:21
build more houses and hotels and eventually rule the world
- 00:24
or at least the board That's a monopoly When you
- 00:26
own everything and can raise rates it's pretty much whatever
- 00:29
level the market will pay before just opting Tio do
- 00:32
nothing and stay at home with a key phrase Here
- 00:34
is mono and it's not related to the you know
- 00:37
team kissing disease mano as in one one owner One
- 00:41
center of price is the only game in town will
- 00:44
think Microsoft in the nineteen nineties where its operating system
- 00:47
was pretty much the only way in which computers around
- 00:50
the globe could work pork Today a Google search which
- 00:53
is almost a monopoly with some ninety eight percent of
- 00:56
searches on its servers Is it bad that these companies
- 00:59
produce such amazingly high desired products that they grew into
- 01:02
monopolies No no not at all However regulators got all
- 01:06
willy on them for using that monopoly leverage to then
- 01:09
restrict business from peripheral competitors And that's a naughty That's
- 01:14
a no no The key issue revolves around what governments
- 01:17
defined as quote fair competition unquote like what is fair
- 01:20
here Well if a gas station uses its leverage as
- 01:23
a place where SUVs go to drink up is it
- 01:26
fair for that station to sell a pack of gum
- 01:28
for five bucks Totally But what if the station forced
- 01:31
you to buy that stick of gum with every gallon
- 01:33
of gas Do you have alternatives What if the owner
- 01:36
of that station owned all of the stations within five
- 01:39
hundred miles and then forced everyone who filled up toe
- 01:43
by that five dollar gun with each fill fair pausing
- 01:46
Yeah probably not Well you could say that they have
- 01:49
a local monopoly and that they are unfairly leveraging that
- 01:53
monopoly to there Gummi advantage But okay so that's Monopoly
- 01:57
What about Manafort's une Well a monopoly Billy was one
- 02:00
seller Ammen Ops Unni is one buyer Think a coal
- 02:05
mine in a small town in West Virginia As a
- 02:07
buyer of labour there simply isn't another employer anywhere remotely
- 02:11
close I'm an optioning Well certainly a local one What
- 02:14
about a public school district buying textbooks for its students
- 02:17
Yeah pretty much of an option E Yes private schools
- 02:20
by textbooks but they usually represent a small percentage of
- 02:22
the public school volumes at least in most areas of
- 02:24
the country And there's not a whole lot of demand
- 02:27
for American textbooks in Russia right Amazon Well as faras
- 02:31
books go Amazon probably is well they're responsible for some
- 02:35
seventy percent of all books sold in the country and
- 02:37
well over half around the world And that number's going
- 02:40
up not down So that vaunted man ops any status
- 02:43
is probably coming The result While Amazon can buy it
- 02:46
pretty much any price they want to buy at just
- 02:49
up until the cellar of that book decides it's not
- 02:51
even worth the effort to go pack up the book
- 02:53
in a box and ship it to him or Teo
- 02:55
Get them the log in codes you know to download
- 02:58
it from their servers That isthe Sellers will sell to
- 03:00
a monopoly money until the marginal value at our contribution
- 03:04
of that last book is zero Then they'll stop and
- 03:07
sit there on a whole pile of books or data
- 03:08
that they have to store and we'll do a whole
- 03:10
lot of nothing Well all of this may sound like
- 03:12
it brings the wheels of the world to a halt
- 03:14
It doesn't necessarily mean that right if monopolies price their
- 03:18
products so high that nobody buys well their monopolies worthless
- 03:21
And if men ops inis pay so little for the
- 03:23
product they consume That producer stopped producing it Well then
- 03:27
the need they lived to serve isn't filled and they
- 03:30
more or less die So there is eventually kind of
- 03:32
economic detente in this war of power and leverage It
- 03:36
just you know sheds a lot of blood getting there
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