For example in the case of California oranges, the growers coop as power to set price (through aggregate supply control) and earn monolpoly profits because of this and also because of the market power associated with consumer loyalty to the brand name (California oranges, Sunkist etc.). But there is easy entry in the sense that it doesn't take a whole lot of capital or specialized knowledge to establish or expand an orange grove (but is does take time for the trees to mature so this allows the monopoly profits to be made in the short-run). The added twist here is that the only legal way to control supply as the aggegrate level is to ration individaul grower crops (this for fresh fruit) onto the market through the enforement of "quality standards," that include a large component of purely cosmetic appearance (this appearance, in turn is used in national advertising to reinforce consumer loyalty to the Sunkist brand). In turn , the best way to get the highest proportion of your crop through the quality standards is to use chemical pesticides. So, we end up with more oranges being grown each year, an average higher percentage of each growers crops be rejected and an ever increasing expenditure on chemical pesticides by each grower. If there were an equilibrium it would be at a point where all farmers earn zero profits and the returns to market power are distributed among the managers of the coop, advertising firms and the chemical industry. In terms of social welfare the farmers are no better off than they would be in a (hypothetical) competitive market, consumers are worse off because they pay more oranges, farm workers and the environment is worse of because of the increased use of pesticides and agricultural science is worse off because integrated pest management techniques can never produce the blemish-free oranges that the quality standards call for. Of course, there is no equilibrium there are boom and bust cycles punctuated now and then by climate disasters. The best quasi-mathematical presentation of this in my opinion is in the micro textbook of Layard and Walters. -----Original Message----- From: Carrol Cox [mailto:[EMAIL PROTECTED]] Sent: Thursday, May 03, 2001 12:10 PM To: [EMAIL PROTECTED] Subject: [PEN-L:11169] Query on Terminology, was ... textbook What, exactly, is "monopolistically competitive markets with entry"? It is partially but not wholly decipherable as ordinary language. Carrol
