

When I was about nine or ten I went on my primary school's ski trip. Whilst there, I engaged in what I think was the first money making exercise of my life. I noticed on the first day that the people on the trip (kids and adults) really liked a particular kind of strawberry lollipop, which appeared only to be for sale at two ski huts/restaurants on the mountain. We only went to one. So on the second day of skiing I bought around 20 of them at 3 Austrian Shillings a pop. Then out on the slopes I sold them to my friends and classmates for more (my memory escapes me but 5 Shillings sounds about right). Consequently for that day I ate lollipops for free, covered my capital costs and made around 30 shillings. I was very pleased. The next day I bought 50 of the things, and sold them on the slopes and back at the hotel. The others on the trip had got a taste for them and really liked them. So I sold them for more like 6 or 7 shillings. This netted me over 100% profit (some of which I ate), if I discount the time I spent on it (which a, wasn't very much and b, I enjoyed myself so much I would have done it for free or even paid for the exercise). So the next day when I went to the hut/restaurant I bought all of their remaining stock, about 150 of the sugary things. Now I was the sole vendor of the product. I then set about selling these at an even higher price, say 10 shillings (there was a certain degree of price discrimination, naturally). I made even more money. I would be able to by extra presents and crappy Mozart momentos in Salzburg on the last day. News of my success reached the staff. On the penultimate day of the week long trip the school deputy head master, Mr Cheeseman, came up to me and told me off. He instructed me to stop selling, or sell at the lower price of 3 shillings, or give them away. Fearing trouble I gave some away and stashed the rest to take home. After all, I had developed quite a liking for these strawberry lollipops with a soft chewy centre.
What is the point of this little story? Well it came to mind last night and I was unsure how it should be analysed.
Either, these were the actions of a precocious child and there was nothing moral or immoral about it. The teacher, if this is the case, was not objecting to the selling and making of money off my classmates, friends, and their parents, but to my cockiness. Possible but I'm not sure I buy it.
Or, I merely recognised a price failure on the part of the original vendor and took advantage of this. Thus the real price should have been 10 shillings. In this circumstance I was merely equalizing the market and taking my cut in doing so. However, I don't think this is the whole story.
Or, I was operating in a different market to the original vendor because I could target tourists who attached a different (higher) value to the product. In this scenario, clever me, and no harm done.
Or, I had improved the product through higher accessibility. I provided the means to getting the lollipop in multiple locations at many hours. So the difference in price to what I charged and the original shop charged is the value added by my sales service.
Or, my first two mass purchases were equalizing the market, and or tapping a different market, or providing value added but when I bought out the lot I gained monopoly power. Now the question is whether I used this monopoly power. Due to time frame, I did not restrict supply (I had to sell them by the end of the week when I had a ready and available clientèle willing to fork out 10 Shillings a go ). Did I set the price at where demand = supply or at where my marginal revinue=supply?
Or, I took advantage of a lack of information on the part of my consumers as they were operating in an alien currency and as such were much less price elastic than they would be in Sterling?
Or, did I never have genuine monopoly control because a there were limited barriers to entry and competitors could have skied to the other hut/restaurant, which we happened never to go to, or to a supermarket and purchase the same product and sold it at a lower price? Indeed, a couple of copycats tried to do the same thing as me by selling cola flavoured lollipops of the same style. They unfortunately suffered an inferior product, I had first movers advantage, and they entered the game late just as the authorities (or Mr Cheeseman if you prefer) stepping in to regulate the business.
Even if my actions were not economically inefficient and were utilitarian, did this come about through aggressive actions? Did I influence others' tastes to my own ends? And if so what can we make of this?
In short, were my actions laudable, entrepreneurial, usurious, all of the above, or other? What do you make of the regulating agent, the teacher? Please let me know what you think.
Friday, 30 May 2008
Was I entrepreneurial, usurious, or both? Advise Please.
Posted by
James Schneider
at
07:53
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4 comments:
Sue Mr Cheeseman for restraint of trade.
Good call, I could have made at least another 250 shillings if he hadn't turned up. That was 12 quid 50. With inflation I would settle for loss of earnings out of court for 15 quid and for emotional damage 500,000.
I think you may be a little strange Mr. Schneider.
That is a distinct possibility.
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