Monday, February 16, 2009
Competition in the movie rental industry has made me a richer man. In the pre-Redbox movie rental days I had to go to Blockbuster and rent a movie for $4. Because I was a poor student, my dates weren’t very appealing to the ladies. I’d rent a movie for $4, the girl would come watch the movie and then leave, to be seen again only in awkward random moments around campus. After a few failures I realized ladies just weren’t pleased with only a movie. They wanted more and had no sympathy for my empty pockets. But dinner and a movie just wasn’t possible when renting a movie cost $4. But then the glorious Redbox was invented. Movies could be rented from a vending machine at McDonalds for only $1.
My dates got so much better. Redbox saved me so much money that I could now get a movie and two Totino’s pizzas, one for me and one for the lucky lady. I could see myself looking back years from now, thanking Redbox for helping me win over the woman of my dreams.
nutgraf
The enhanced productivity of Redbox has freed up $3 for every movie rented.
There, I told you my secret to success but I didn’t ruin my chances of ever dating on this campus again for no reason. There is a moral to this story: Everyone benefits from competition. Competition drives businesses to increase their productivity. Productivity is derived from efficiency and technology. In the Redbox example it’s easy to see that the machine was the technology, which led to the more efficient allocation of resources. The machine made the movie rental industry more capital intensive and less labor intensive. This reallocation significantly lowered the long-run average cost for Redbox. Redbox in turn was able to maximize profits at a much lower price to the consumer, making everyone wealthier.
The enhanced productivity of Redbox has freed up $3 for every movie rented. According to a 2006 Harris Interactive survey, 18 to 24-year-olds watch 88 DVDs each year. That means Redbox allowed average students to spend $264 a year on something they otherwise would have gone without (there is a real stimulus). I bought pizzas with my extra dough. What did you do with yours?
But it is also easy to see the discomfort created by ever-present competition. Redbox doesn’t need any cashiers, so my enhanced ability to woo you fine ladies was offset by Blockbuster Bob’s unemployment. Concern for Bob is understandable, but, ladies, don’t feel guilty for enjoying that delectable pizza. The economy is not a zero-sum game. The extra demand for Totino’s pizza will force Totino’s to expand; maybe it will hire Bob (or he will be hired by the industry you spent your extra $264 on).
We have to resist the urge to hold back competition. Doing so undermines productivity and wastes resources. Think of where we would be if we kept the producers of typewriters, wagon wheels and VCRs around. Without competition it would be a lot harder for poor guys like me to afford a night of Redbox and Totino’s for one lucky lady.
— Davidson is a Tonganoxie senior in economics.
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Comments
Davidson: Dating made easy with economics
Demand an answer from your Senator or Congressman?
WHO KILLED THE E-VERIFY IN THE STIMULUS PACKAGE? Thought the whole idea of the Stimulus bill was to support, the millions of unemployed AMERICAN WORKERS. Instead Speaker Pelosi and Senator Harry Reid in secret and no discussion killed E-Verify. It would have stopped illegal aliens getting jobs. Instead shows you that Politicians are still puppets of big business and the special interest lobbyists. E-Verify costs pennies instead of $ Billions to function?
HOW MANY BILLIONS OF DOLLARS COULD BE SAVED, IF US TAXPAYERS WERE NOT FORCED TO PAY FOR EDUCATION, HEALTH CARE AND OTHER GOVERNMENT BENEFITS, INCLUDING AN OVERCROWDED PRISON SYSTEM. ALL THIS TO BENEFIT PREDATORY BUSINESSES WHO HIRE ILLEGAL ALIENS OVER AMERICANS.
Voice your anger at the politicians, by calling the Capital switchboard at (202) 224-3121 MAKE THEM SWEAT!
Davidson: Dating made easy with economics
thanks but no thanks brittanicus... the damage done to the businesses would affect our economy much more than the damage to individual workers. if you can't find a job that illegal immigrants can do, you probably should have tried a little harder growing up and i don't feel sorry for you.
Davidson: Dating made easy with economics
Is Brittanicus going to college so he can pick fruit?
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