The Parks Department has arranged a gala to raise money for a new park on the old Sullivan Lot. If they can’t raise the money, the lot will be sold to build another Paunch Burger. Nothing has gone their way while organizing the gala, and Tom hasn’t been able to find a caterer who was willing to provide free food, but then he had an idea. Paunch Burger operates in a monopolistically competitive market, which means the introduction of another fast-food business would lead to decreased demand for other fast-food companies. Tom is then able to arrange other fast food companies to provide food since they have more to lose if a new restaurant opens.
See more: monopolistic competition, imperfect competition, demand, substitutes, incentives
Tom gets an offer that someone is interested in buying his business. After some though, Tom chooses not to sell his clothing rental business and then finds out that the potential buyer will now try to drive him out of business by setting up across the street. Monopolistic competition allows for easy entry and exit into a market that is profitable and results in a reduction in long term profits. This is also a good example of the Hotelling Model where similar firms setup near each other to split the market.
See more: barriers to entry, demand shifts, duopoly, free lunch, hotelling model, imperfect competition, invisible hand, marketing, mergers, monopolistic competition, NSTAFL, product differentiation, supply shifts, zero profit
While Leslie Knope is running for city council, the Parks Department needs to get a lot of vans to help people get to the polls. A local van rental company realizes they have a monopoly over the market for these white vans and this recent surge in demand has given them the opportunity to capitalize.
See more: bargaining power, bidding war, demand, demand shifts, imperfect competition, market power, monopoly, rent seeking, supply