But when you think about it,
it's not obvious that that would describe the airline industry.
I think airlines are, these are businesses which are characterized by
huge capital budgets, it's a highly technical business to be in,
I don't think it's necessarily the case that just anybody can run an airline.
So remember, theoretically, in a perfectly competitive market,
no firm realizes economic profits, or what economists would describe as rents.
So you may recall that, you know, there are a couple of different perspectives
from economics that shed some light on this idea of, you know, where do profits
come from in a particular industry market segment or in a particular firm?
So on one hand, we have this idea from industrial organization
economics about monopoly profits or monopoly rents.
And this is an idea that focuses largely on barriers to entry and
it really focuses on the structure of the industry and
how that can impact the prospects of firms operating in that industry.
On the other hand, there is a view, the Ricardian view,
that comes more from the resource based tradition.
This focuses much more on firm differences and barriers to imitation.
So, again, today we are gonna focus a little bit more on the monopoly profits
idea and how an industry structure and the set of dynamics in an industry
can drive the possibility for monopolistic profits.
So let's dig into that a bit more.
Remember that the industrial organization perspective kind of takes it as a given
that the industry structure matters a lot.
In fact, from this perspective, this is the most important thing.
And, you know, it's very difficult, given the sort of barriers to competition,
it's very difficult to move the supply curve outward and lower prices.
And so, essentially,
that difficulty gives rise to the possibility of monopolistic profits.