Fat Kow, Monopolistic Competitition, and College Diet

A couple of econ colleagues and I were talking about the Business College's latest squatter, the Fat Kow. A new food cart has showed up in front of Bexell, offering a vegetarian menu at the pleasantly low price of $3.50. I'm planning my first visit tomorrow, where they'll be serving Red Beans and Brown Rice Salad. Maybe I can co-opt this blog into a college food reviewer.

The econ kids were talking about how come we don't see more of these food carts in Corvallis. Econ undergrads are notoriously price sensitive (this is why we meet in a bar during happy hour), but there is also a genuine economic intuition behind our curiosity.

Restaurants generally fall under the microeconomic umbrella of monopolistic competition. Like perfect competition, there are many firms and few barriers to entry. But like monopolies, restaurants have a degree of market power and product differentiation. Still, in the long-run, monopolistic competitors should find themselves producing zero economic profits, as any profit should be eaten away by new firms entering the market.

The introduction of food carts has the potential to upset the status quo, as they are generally regarded to have a lower average cost than restaurants. No wait staff, no building costs, and low maintenance needs all might drive costs down enough to seriously change the food game. Restaurants will still serve a purpose; you could probably never bring a date to a food cart unless you both are exceptionally open-minded. But for those quick and cheap dashes for food in between classes, food carts might finally break Carl's Jr.'s $1 spicy chicken dominance over the market.

But while my econ buddies were optimistic about the future of food carts on campus, I was personally hesitant. Thanks to my rigorous theoretical education from Professor McGough, I am now convinced that there are no more good ideas left in the world. If campus food carts are such a lucrative venture, why haven't more entrepreneurs taken up the gauntlet? There must be a reason, maybe some rule banning food carts that the University heads and the angry Panda Express lady cooked up in a back room a few years back. I'm just too pessimistic to believe that a few tipsy undergrads can come up with an original business plan someone else hasn't already tried and failed.

Then again, if I thought I could make money, I'd probably be inside Bexell rather than outside eating savory tofu and garbanzo beans.