Sunday, November 25, 2012

Everyday Economics - Bank of America

I've challenged my Principles course to find economics in their everyday life. For the most part, they've all done an excellent job, even if some of them have worked in backwards. To make sure I wasn't asking too much, I tried it myself, and it didn't take long (granted I'm getting a PhD in this, so it's a little easier). As I went to the bank today to withdraw money from the ATM, this note was pinned to the teller window:
Last week we discussed monopolistic competition and how firms try to differentiate themselves from their competitors through various means. One of the results of many monopolistically competitive firms is the excess capacity generated by trying to achieve the lowest average total cost. In the case of Bank of America, it appears that they are attempting to lower their average total cost by discontinuing the drive-thru service. Not long before the date above, a new bank opened in Pullman, implying there must be some short-run profit in the banking industry. Perhaps this is a ploy by BOA to maintain their profits through cost reduction.

No comments:

Post a Comment