Monopoly[R] Pricing

Article excerpt

I. INTRODUCTION

There is a large and rich literature in economics on monopoly pricing (e.g., see the reviews in Braeutigam 1998; Ordover and Saloner 1998; Varian 1998). However, a close examination of this literature reveals a surprising gap: there have been virtually no studies on Monopoly[R] pricing. We propose to fill that void with an empirical examination of the pricing of the board game Monopoly[R]. In particular, we examine market-level, quarterly prices from 1990 to 2002 and find evidence of customary pricing.

II. THE ECONOMICS OF MONOPOLY@

The board game Monopoly[R] was patented in 1935 by Charles Darrow, who later sold the rights to Parker Brothers. However, questions have been raised about the legality of the 1935 patent. The game Darrow patented (and claimed to have invented) is similar to a game patented in 1904 by Elizabeth J. Magie, which was designed to educate people about the tax proposals of Henry George (George 1879); in particular, one variation of the rules illustrated how a land tax would affect landlords' profits. Magie's game was originally called "The Landlord's Game" but was also known as "Monopoly" or "Finance" (Anspach 2000). Charles Darrow, who played Magie's game, misrepresented himself as its inventor and was erroneously allowed to patent it in 1935 after Magie's patent expired (Anspach 2000; Orbanes 2006; Supreme Court of the United States 1982). Because the game was in the public domain after the expiration of Magie's 1904 patent, Darrow effectively "enclosed" it. Moreover, a former Parker Brothers executive describes the legality of the 1935 patent as "probably weak to begin with" (Orbanes 2006, p. 76) because it was filed after the legal grace period. Although the 1935 patent expired in 1952, ongoing trademark protection of the name Monopoly[R] and copyright protection of the game's visual design (1) ensure that Parker Brothers remains a monopolist over Monopoly[R].

Not surprisingly, the monopolists of Monopoly[R] have aggressively sought to block entry by rival games. Between 1935 and 1940, Parker Brothers sued and forced out of the market two close competitors named New York and Big Business (Orbanes 2006). They also used the court system to temporarily block (between 1973 and 1985) the entry of a rival game named Anti-Monopoly[R], which was created by Ralph Anspach, an economics professor at San Francisco State University (Anspach 2000; Supreme Court of the United States 1982). Anspach countersued, with the result that the monopolist over Anti-Monopoly[R] sued the monopolist over Monopoly[R] for antitrust violations (Anspach 2000).

Parker Brothers (now a division of Hasbro) does not release annual sales figures, but it claims that Monopoly[R] is the best-selling board game in the world, with over 250 million units sold and 480 million players since 1935 (Hasbro 2007).

We are aware of only one previous study that even tangentially examined Monopoly[R] pricing. Besley and Rosen (1999) estimate the extent to which sales taxes are shifted to consumer prices for 12 commodities (including Monopoly[R]) and use those estimates to make inferences about market structure. They fail to reject the hypothesis that sales taxes on Monopoly[R] are fully shifted to consumers, which is consistent with a perfectly competitive Monopoly[R] market.

III. DATA

In this paper we examine the nominal price of a new Parker Brothers' Monopoly[R] board game edition #9 (this is the usual game with properties named after Atlantic City locations, not any new city-specific editions or other special editions), by metropolitan area, from 1990 quarter l to 2002 quarter 4. The data were collected by and purchased from the Council for Community and Economic Research (C2ER), formerly known as the American Chamber of Commerce Research Association (ACCRA). Data are not available for prior to 1990 quarter 1, and after the fourth quarter of 2002 the C2ER ceased to collect prices on the Monopoly[R] board game. …