This article told the story of a skiing company named Vail, and how their monopoly in Colorado effected the economy. Originally to go skiing, consumers would need to buy a day pass which was profitable for Vail, however, if there was no snow, there would be no business. Vail decided to add an Elite Pass, which would give skiers a season pass at the resort, only if they bought ahead of skiing season. This would mean consumers that loved to ski would need to buy an expensive pass in October or November to earn the financial benefits of the pass. This new model would earn Vail enough revenue to buy out other skiing resorts and they now own 41 resorts in Colorado. This has created a monopoly in the economy, which would normally reduce the efficiency of the and industry, however, "if a monopolistic firm can charge different prices to different customers, it need not reduce output to increase its profit." This would mean that Vail can have a monopoly in the skiing industry, without losing any efficiency. The article reports that Vail's revenues went up 14%, and their season passes make up about 61% of their revenue.
https://www.economist.com/united-states/2024/02/27/the-economics-of-skiing-in-america
This makes me curious as to what the long term affects for this look like, skiing is growing and if there is a monopoly destroying competition then the effects will be exponential.
ReplyDeleteIt is interesting how a single change like season passes can lead to a monopoly of the whole industry. 61% of revenue from season passes is a large chunk. I wonder what other skiing companies will do to try to end the monopoly.
ReplyDeleteThis reminds me of the conversation we had in class about how skiing in European countries is less expensive than skiing in America especially in a place like Colorado. My fear would be that it will no longer be justifiable for Americans to pay hundreds of dollars for a day pass at a Vail resort. Then again if Vail owns 41 resorts and is able to stay just as efficient as they were pre-monopoly I suppose this will not be an issue?
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