All I Ever Needed To Know About Microeconomics I Learned From The Board Game Monopoly™ Essay, Research Paper
All I ever needed to know about microeconomics I learned from the Hasbro board game Monopoly. I hope that my teacher does not find the above statement too offensive, and put the zero on my paper before he even reads this. Some people, like myself, need practical models in order to understand certain concepts and theories. In our text book The Economy Today it completely ignores the intrinsic value of business decisions because you can’t put a numeric value on it. The game Monopoly™ is all about the numbers. In the game of Monopoly™ you have goals: The object is to bankrupt all opponents. To do so, you must be dedicated and make each decision with the aim of improving your chances and wiping out your opponents.” (Monopoly) In what I will call throughout the paper real life, the goal is the same. Look at the excerpt from an ABC New article called The Virtues of Monopolies.
Ten years ago you wouldn’t have found Intel’s name on a list of the world’s top chip makers. You might not even have heard of it at all. But even back then, it had the mind-set of the monopolist. Today, Intel is virtually alone in the production of microprocessors. Its share of the worldwide market exceeds 79%. Its nearest rival, AMD, has just 11% of the business. What makes Intel the world’s greatest manufacturer (not the world’s greatest technology company—a silly pigeonhole not worthy of the firm’s pre-eminence) is its understanding of how to think like a true monopolist. It doesn’t want to be beaten at anything. (Cramer)
I think the game gives some excellent examples of microeconomic theories such as Barriers to entry.
Our book discusses many barriers to entry. It defines a barrier to entry as “Obstacles that make it difficult or impossible for would-be producers to enter a particular market.” (Schiller p499) In the game of Monopoly™ there are also barriers to entry. On the official Hasbro ™ website, and in many books you can find all kinds of strategies for winning the board game.
Know when to cause a building shortage
If you have only low-rent color groups, quickly build three or four houses per property to restrict the availability of houses to owners of high-rent color groups.
Never move up to a hotel anywhere if the return of houses to the bank would enable an opponent to develop an expensive color group. (Example: the Yellow group has just been formed. There are only three houses in the bank, but six hotels. You own the light blues with four houses on each. Do not buy hotels. Doing so would give the player owning the Yellows an opportunity to build up to hotels on them.) (Monopoly.com)
By buying up the houses you are creating a barrier to entry. It is a barrier even if your opponent has the necessary funds to enter. This is because of the basic economic principal of scarce resources, or as Stephen Slavin calls it in Economics Control over essential resource. (Slavin 541)
The game Monopoly is a prime illustration of scarce resources; that is, “There’s a limit to the amount we can produce in a given time with available resources.” (Schiller 9) The property is limited – Nothing can be done to create more property; you can only build on your property to make it more productive, if the houses or hotels are available. This will increase your economy of scale so you can increase your firm size and ultimately increase your Concentration ratio to the point where you drive everyone out and you own it all. The total amount of money available is $15,140 with each player initially receiving $1500.00
As play proceeds it can take on the nature of an Oligopoly Market Structure. An oligopoly is an imperfectly competitive structure in which firms dominate the market” (Schiller 517) In the book The Economy Today the author writes of the Game Theory. “Because only a few producers participate in the market, each oligopolist has to consider the potential responses of rivals when formulating price or output strategies. This strategic interaction is the inevitable consequence of their oligopolist position.” On the CD-ROM that accompanies the book is a game that you play with another student to demonstrate this principal. When you finish the game and compare your scores you are told that the only way that you can win, or score 100 is to cheat, that is, collaborate with your opponent. We see this modeled in the board game when two (or more) players gang up against one another. Cheating maybe, but sometimes the conspiracy is unspoken and perfectly legal. Again – real life.
Monopoly™ is a game of skill and chance. You may have all the skill in the world and still lose it all because of chance, a fact that our text book addressees, regarding real life, in the chapter Theory and Reality when they seek to answer the question “Why things don’t always work.” (Schiller 378)
In the board game you can find all sorts of experts with computer models and graphs predicting the outcome.
The chart above shows what properties get landed on the most on an average trip around a Monopoly board. The chart below shows the costs of building by.
In real life economist have charts and graphs and computer models running out the — well you know.
Microeconomics was the most difficult class that I have taken since my return to school, but then I figure its just a game like everything else. In Monopoly ™ I found many essential theories of microeconomics: barriers to entry, game theory, scarce resources, oligopolies and many more. The goals for the players of the game and of economic life are the same as mine in this class, to come out on top.
Cramer, James The Virtues of Monopolies. ABC News. 2000. http://abcnews.go.com/sections/business/street/cramer_0509/index.html
Monopoly. http://monopoly.com 2000
Schiller, Bradley R. The Economy Today The McGraw Hill Companies, Inc. 1999
Slavin, Stephen L. Economics The McGraw Hill Companies, Inc. 1996