Monopolistic Business in Thalwil

One of the monopolistic businesses in Thalwil is the movie rental called Bosshard’s Movie Corner. The most obvious characteristic that makes this firm a monopoly is that it is the only movie rental in the whole town. There are no close substitutes to renting a movie, which is another reason why the firm is monopolistic. The closest substitute would be buying the movie from a video store such as Ex Libris, but there the price is much higher meaning that the majority of consumers would rather rent the movie for a cheaper price than buying it for a higher price. Furthermore, since the monopolist is the only supplier of movies that are for rent, it can change the price of the movies by changing output. The firm faces a downward sloping demand curve, so increasing output lowers the price, decreasing output increases the price. The firm will decide upon a price for renting movies that will maximize the firm’s profits. Another characteristic for a monopolistic firm is that it does not have any competitors, so it cannot compete on price. Therefore, to attract new consumers the firm uses non-price competition such as advertising and other promotional approaches. Although Bosshard’s Movie Corner does in fact have competitors when it comes to the price of movies – Ex Libris – it is still a monopolistic firm if you only consider movies that are for rent. The firm uses promotional campaigns such as “rent 2 movies for the price of one” to attract customers.

A pure monopoly is a market in which a single company has control over the entire market for a product, usually because of a barrier to entry such as a technology only available to that company. For the video renting firm in Thalwil to be a pure monopoly, a couple of things would have to be true. The entry to the market would have to be completely blocked, meaning the firm would have no immediate competitors. Barriers to entry may be economies of scale, legal, technological or another type. However, there are no barriers to entry into the market of movie rentals because another firm could easily open a movie rental place if they had the resources, in which case the market would become competitive.