Cliff Sosin

And that's the equilibrium. That's the non-cooperative equilibrium. We make no money. But now... Let's imagine instead that I had to bring a tray with a fixed number of cookies and I can't make more. Well, what happens is that morning I'm trying to figure out how many cookies I'm going to make. And I ask myself the question, should I make one more cookie?

And that's the equilibrium. That's the non-cooperative equilibrium. We make no money. But now... Let's imagine instead that I had to bring a tray with a fixed number of cookies and I can't make more. Well, what happens is that morning I'm trying to figure out how many cookies I'm going to make. And I ask myself the question, should I make one more cookie?

And if I make one more cookie, it'll have two effects. One is I'll get to send extra cookie and I'll make whatever the profit on the cookies are times that cookie. But the other is it will increase the number of cookies in the market, which will drive down the price of cookies. And this will cause me to sell all of my cookies at a slightly lower price.

And if I make one more cookie, it'll have two effects. One is I'll get to send extra cookie and I'll make whatever the profit on the cookies are times that cookie. But the other is it will increase the number of cookies in the market, which will drive down the price of cookies. And this will cause me to sell all of my cookies at a slightly lower price.

And so as I'm making this decision, you can see how there would be a natural maximization point where I maximize profits. Now, in this case, there's two competitors. So when I add an extra cookie to the market, the price for me, I also lower the price for my competitor. I don't internalize the effect on my competitor.

And so as I'm making this decision, you can see how there would be a natural maximization point where I maximize profits. Now, in this case, there's two competitors. So when I add an extra cookie to the market, the price for me, I also lower the price for my competitor. I don't internalize the effect on my competitor.

So I end up behaving like a monopolist, but a monopolist who only absorbs half of their price impact in the marketplace. In other words, one who faces more elastic demand. But I still behave like a monopolist, just with one facing more elastic demand. So there's still monopoly profits to be had. So the equilibrium gets worked. We both solve our differential equations at the same time.

So I end up behaving like a monopolist, but a monopolist who only absorbs half of their price impact in the marketplace. In other words, one who faces more elastic demand. But I still behave like a monopolist, just with one facing more elastic demand. So there's still monopoly profits to be had. So the equilibrium gets worked. We both solve our differential equations at the same time.

We get to an equilibrium. And lo and behold, we both end up making profits. OK, this is all very theoretical. So you start studying the cruise line industry. OK, just to pick an example of an industry, I'm not that. I've never owned a cruise line business, but I've been around it. It turns out that if they want more cruise ships, they can't just snap their fingers and have more cruise ships.

We get to an equilibrium. And lo and behold, we both end up making profits. OK, this is all very theoretical. So you start studying the cruise line industry. OK, just to pick an example of an industry, I'm not that. I've never owned a cruise line business, but I've been around it. It turns out that if they want more cruise ships, they can't just snap their fingers and have more cruise ships.

The number of cruise ships for a good long while is essentially fixed. And so what they do is, this is a perfect example of corno oligopoly. The number of cruise ships is fixed in the short to medium term. So they maximize yield, which basically means they're adjusting price. That leads you down a path of, okay, this is a business where

The number of cruise ships for a good long while is essentially fixed. And so what they do is, this is a perfect example of corno oligopoly. The number of cruise ships is fixed in the short to medium term. So they maximize yield, which basically means they're adjusting price. That leads you down a path of, okay, this is a business where

Just from that perspective, there's lots of other things to think about. There's brand, there's distribution, there's a zillion things. But from that perspective, now you have a sense as to how this is a business where there should be some monopoly profits. But what will mediate how much economic profits there are is how many competitors there are, right?

Just from that perspective, there's lots of other things to think about. There's brand, there's distribution, there's a zillion things. But from that perspective, now you have a sense as to how this is a business where there should be some monopoly profits. But what will mediate how much economic profits there are is how many competitors there are, right?

And also how much elasticity of demand there is. And then, of course, other factors. And then, of course, there's also the question of Are you in equilibrium, or did people accidentally bring too few? Let's say you show up at the fair, and you brought your tray of cookies, and it rains. Well, now the price of cookies plunges, and you lose money, right?

And also how much elasticity of demand there is. And then, of course, other factors. And then, of course, there's also the question of Are you in equilibrium, or did people accidentally bring too few? Let's say you show up at the fair, and you brought your tray of cookies, and it rains. Well, now the price of cookies plunges, and you lose money, right?

Or let's say you show up, and for whatever reason, a famous singer shows up, and there's a gazillion people, and now you sell the cookies at a premium. So are you at equilibrium is another good question. But it turns out that a lot of travel businesses are coronal oligopolies. you know, rental cars, air travel, cruises.

Or let's say you show up, and for whatever reason, a famous singer shows up, and there's a gazillion people, and now you sell the cookies at a premium. So are you at equilibrium is another good question. But it turns out that a lot of travel businesses are coronal oligopolies. you know, rental cars, air travel, cruises.

So this is an example of using a mental model that allows you to understand like certain types of businesses in a somewhat systematic way. One of the investments I sort of cut my teeth the most on where I first had a lot of success was in the construction equipment rental business. And that is also It is a Corneau oligopoly.

So this is an example of using a mental model that allows you to understand like certain types of businesses in a somewhat systematic way. One of the investments I sort of cut my teeth the most on where I first had a lot of success was in the construction equipment rental business. And that is also It is a Corneau oligopoly.