Economics Essay Help! Related to Apple

[7254278]

I am writing an essay for my economics class. The title is: Is Apple Computer and the iPod a Monopoly in the MP3 Player Market?

Now I am drastically under my word limit. I know the ipod has a very commanding market share in the mp3 player market. But is it violating any anti trust laws? Why or why not? I am really not to good in economics and would appreciate all the help I can get.

 

[72930]

iTunes bought music and movies only work on the iPod...and the iPod does not allow DRMed music from any other store...

 

[7254278]

iTunes bought music and movies only work on the iPod...and the iPod does not allow DRMed music from any other store...

I am sorry for the ignorance, I am not yet too knowledgable about this topic but how does this determin wether the iPod is a monopoly or not.

 

[furious]

Apple has control over their market share. ( hypothetically ) So if they had 50% market share they had control over that % by locking it down with DRM. So other music/movie download services could not gain market share from Apples 50%. So effectively apple is controlling their market share too. To an extent.

 

[7254278]

Apple has control over their market share. ( hypothetically ) So if they had 50% market share they had control over that % by locking it down with DRM. So other music/movie download services could not gain market share from Apples 50%. So effectively apple is controlling their market share too. To an extent.

Ah ok, thanks for clearing that up. So you guys would describe this as a legal monopoly?

 

[nc7r]

I'm by no means an economist but I've studied it for the past year and 3 months as an A-Level in my grammar school, although doing badly at AS, I do business studies as well, meaning I do know a bit about markets and monopoly structure, so here's my call:

Firstly, look at this: http://en.wikipedia.org/wiki/Monopoly. Read it through.

In Business, a legal monopoly in the UK is a company that has a market share of over 25%, although in Economics I believe it to be a market of many buyers, but only one seller. Meaning depending on the product's elasticity it can change price and demand should only decrease a little if inelastic, or none at all if it's perfectly inelastic.

I'm reckoning you should wack some diagrams in, like the monopoly one, and explain how although Apple sell to x% of the market (go find figures) that they don't actually control the market, and if they did have total economic defined monopoly power then talk about profit max and whether you think Apple operate where Marginal Cost = Average Revenue (i think ).

Then ermm. Let me think.

I googled and got this: http://www.theregister.co.uk/2004/10/12/ipod_us_share/ which quotes "Apple iPod grabs 82% US retail market share" which is very very high. I don't think that Apple has anywhere near that for it's computer products, possible 5-10%? I couldn't be sure without looking.

Anyway.

Hope that points you in the right direction. Worst comes to worst, tell your teacher it was hard, write some crap that's worth a few words, and then they'll explain it to you next lesson


Nick.

 

[IJ Reilly]

Ah ok, thanks for clearing that up. So you guys would describe this as a legal monopoly?

By what definition? The definitions of monopoly found in antitrust laws and the definition of monopoly found in classical economics are very different. In fact antitrust laws aren't much interested in monopoly per se, but in abuse of market power, e.g., restraint of trade. Is Apple restraining trade? Are they using their market power to disadvantage competitors, in a way they could not if they had a smaller market share?

 

[IJ Reilly]

In Business, a legal monopoly in the UK is a company that has a market share of over 25%, although in Economics I believe it to be a market of many buyers, but only one seller. Meaning depending on the product's elasticity it can change price and demand should only decrease a little if inelastic, or none at all if it's perfectly elastic.

Most of what I know about this subject I self-learned over the course of the Microsoft antitrust trial, which I followed very closely, but I am certain that the U.S. at least has no automatic definition of monopoly. To begin with, the question of market share is not easily answerable, if only because the market itself needs to be defined properly. Every company has an automatic 100% market share for their own products. Is that a monopoly? Hardly anyone would say so, but some argue (for instance) that Apple monopolizes the Mac market, because only Apple can make a Mac. It's a ludicrous way of defining a market, but people do it.

Here's Adam Smith's definition of monopoly:

"The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken... The one is upon every occasion the highest which can be squeezed out of the buyers... The other is the lowest which the sellers can commonly afford to take, and at the same time continue their business."

 

[nc7r]

By what definition? The definitions of monopoly found in antitrust laws and the definition of monopoly found in classical economics are very different. In fact antitrust laws aren't much interested in monopoly per se, but in abuse of market power, e.g., restraint of trade. Is Apple restraining trade? Are they using their market power to disadvantage competitors, in a way they could not if they had a smaller market share?

Exactly, one more thing I thought I'd highlight for you..

Is that the UK says that it's Competition Comission will 'investigate' (no promise of action) if a company is getting above 25% of market share. With Tescos however, they are what, 32% or something? Their growth was internal, they didn't buy anyone out, and they're still getting growing numbers of customers.

Now what's the reason you might ask.

Mainly good service, good products, cheap and reliable. What are the government going to do, say that

"Woooahhh, you have competitors offering really similar substitute goods at various prices, but customers are coming to you, that cant go on!?!'

I doubt that very much. Apple haven't exploited anyone, they're doing well because they have a good ethos, and although they are ripping Microsoft, no-one has brought out much of a competitor to the iPod

 

[Abstract]

To write a paper about monopolies, you're either going to have to either find one definition of a monopoly and stick with it, or write about all the different definitions of the word monopoly and say whether Apple should fall under the category of "monopoly".

 

[7254278]

To write a paper about monopolies, you're either going to have to either find one definition of a monopoly and stick with it, or write about all the different definitions of the word monopoly and say whether Apple should fall under the category of "monopoly".

You are 100% right, I am gonna stick with the classical economical deffinition of monopoly. . . the one in the wikipedia article.

 

[question fear]

You can always argue against the idea of apple being a monopoly, because while they have a large marketshare and a closed market, the ipod allows non-drm'd music to be loaded on. Since Apple does not have an exclusive on pricing or cds to a majority extent, there are other ways to utilize an ipod without downloading from iTunes. As long as there are other ways that are equally convenient to obtain music and mp3 players, it's not even close to a monopoly.

Also, if you're writing a for/against paper, it is sometimes easier to structure and argue if you're going against it...the opening statement gives you a natural sounding point to rail against. So in your case, if your paper is "Apple has a monopoly on music/mp3 players.", you could argue against it. Your opening paragraph has 3 refutations, and your following paragraphs expand them. Also helpful: you puff up the length by refuting your own argument and then flipping back to defend it. I hope this made sense, and helps you somewhat with your essay.

 

[7254278]

Here is what I have so far. . . It is 2000 words(I want to add atleast another 1000). I think it is alright, except for the part entitled "Does Apple Computer Inc. Control the Prices In the Market". That part is seriously laking economic theory and I would seriously LOVE help on that section. The rest is alright I think. Lets see if you guys can gimme some more help.

EDIT: Incase you guys were wondering this is my end of year paper for my highschool economics class.

By the way I am greatly appreciative for your guidance.
Patmian212

EDIT: Essay updated

 

[lamina]

Just make sure to change the title to Apple, Inc. to reflect the recent name change

 

[7254278]

The PDF with my essay has been updated, I added another 200 words or so to the "Does Apple Computer Inc. Control the Prices In the Market" part of the essay in order to beef it up a bit. But I am still having trouble applying the economic theory that I wrote about in that part to apple. Any help would be appreciated.

Thanks a lot
Patmian212

 

[63dot]

you would have to pretend, for your essay, that apple inc is based in england because in america, it's hard to consider apple inc and their ipod a monopoly

if you want to talk monopoly, at least in the states, you are a lot closer when talking about microsoft

 

[7254278]

you would have to pretend, for your essay, that apple inc is based in england because in america, it's hard to consider apple inc and their ipod a monopoly

if you want to talk monopoly, at least in the states, you are a lot closer when talking about microsoft

My concluding point is that apple is not a monopoly but a legal natural monopoly, based on consumer decision so I guess its alright.

 

[the vj]

It wopuld be easyer to write a paper on why papers should be 2000 while a good paper can explain itself in less than that? That would rise a good debate in class. Quantity does not reflect quality.

 

[7254278]

It wopuld be easyer to write a paper on why papers should be 2000 while a good paper can explain itself in less than that? That would rise a good debate in class. Quantity does not reflect quality.

Yeah but since the professor set the word limit at 4000 and I am scraping 2000 I know I must have left a lot out, which is why I am asking for advice. Economics was never my forté

 

[21stcenturykid]

You need to 3 box it (as my economics teacher would say) which would be 1 YES apple does control the market,2 NO it doesn't and then 3a conclusion or... (1)why it could be said to control the market and (2)why it cant be said to control the market. Then to finish it off you need a conclusion whcih states your view on the whole thing...so basicly you say wether you think apple inc. have a monopoly.(this would be the 3rd box in either case)

Someone mentioned a wikipedia article?? Surely you have a textbook definition?? KEEP AWAY FROM WIKIPEDIA FOR COURSEWORK!!!!! its a big no no! I think the same post mentioned a monopoly being "a market of many buyers, but only one seller." If im correct this is a MONOPSONY not monopoly. but then again a monopsony might be only one buyer i could be confused.. Check in a text book

Oh and if you have an introduction...when you get to the conclusion answer the questions asked in the introduction. and make sure you dont go too far from the point in the middle of the essay.

 

[7254278]

Well, I finished the essay, its around 2800 words, its not perfect or very good but I'll pass hopefully, what I lacked in economic theory I think I made up for in linguistics and enthusiasm . . . Here is the complete verison incase anyone is interested. . . I wanna thank you all for your help, you guys made my life easier, I really appreciate it.

 

[paul451]

Hey,

I see you are doing the IB, I am too, well on the certificates and not the full diploma.
However I study Economics HL.
Your essay is only 2800 words, do you not need to reach a minimum of around 3400-3600?
Also seriously avoid wiki like the plague. the examiners really dont credit it as a source and this essay is crucial to gaining those extra few points. The way I wrote it was with the criteria next to me.

If you are struggling to meet the word count bring in as many "real world" examples. The IB loves those.

I dont know what IB textbook you guys use. But I strongly recommend the "Economics from a global perspective", it has plenty of examples and a ton of theory that applies to what you are writing about. I would be surprised if you do not end up struggling with staying withing the 4000 word limit.

If you want I can send you my Economics Portfolio, which shows you how the IB want you to put the theory into your essays.


Good Luck

Paul

 

[j26]

If you're still open to observations, here's some (bear in mind it's 13 years since I studied economics). They might get you closer to the 4,000 words.

It might be worthwhile throwing in a bit about oligopolistic markets (non-price competition, product differentiation etc). It might be more Appropriate to consider Apple a strong contender in an oligopolistic market.

Someone mentioned about defining the market - it would be worth mentioning that you can widen the market to include mobile phones that can play music, and Apple becomes a minnow. It could even be broadened to include all portable media devices (it plays games, does video, and photos). It is also supported by a huge third party industry making accessories which make the iPod a more compelling choice (stylish speaker set or some dodgy set up?). It highlights that the market is difficult to define.

Also worthwhile would be to mention the newer 3g phone market offering download services. It's not a big issue in the US, but services have been launced in the UK and Ireland - three.ie has a dual download service - buy the song and it automatically allows you to download a copy to your pc). I gather phone downloads are pretty strong in Japan too. This will become more imprtant as the US catches up with its mobile infrastructure, hence part of the reasoning for the iPhone. The relatively easy entry of new competition is not the hallmark of a monopolistic industry.

Stick in Steve Jobs observation that only 3% of music on iPods is DRM'ed (in his "Thoughts on music"). It's a useful stat to put in where you're talking about market dominance by the iTunes Store. Also his appeal to the music industry to allow them to sell music without DRM.