Tommy’s Closet vs. Rent-A-Swag

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.

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Market Power with 22 White Vans

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.

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