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Monopolistic Competition and Peanut Butter Cookies (GF)


I’m a Peter Pan fan.


Yes, the story is good, but I’m talking about the peanut butter brand Peter Pan. That’s what I grew up eating and that’s what I always pick up when I’m at the store.


Why? Is it better than the other peanut butter brands?


Umm… Sure?


To be honest, I don’t know. I’ve had the others. They seem fine, but when I go to the store I buy Peter Pan. In fact, I was shocked when I found out that a good friend (I won't name names) preferred a different brand of peanut butter – JIF. It blew my mind to realize someone I think is pretty awesome preferred a different brand of peanut butter to me. In other words, I feel some strong brand loyalty towards Peter Pan.


Monopolistically competitive goods are goods that are unique but with close substitutes. I’d say that peanut butter fits that bill. Peter Pan, JIF, Skippy, Smuckers, Peanut Butter & Co. have distinguished themselves as separate brands, although very similar products. After all, it's all just peanut butter!


A few years ago, Peter Pan had a complete recall on peanut butter. All of their peanut butter was pulled off the shelves, and you couldn’t buy it! What did I do? Well, it’s simple, I just shifted over to the other main brands. I didn’t like it, but I did it. In economics terms, that means the demand for JIF, Skippy, etc. increased because of fewer close substitutes. Additionally, the demand for these other brands likely became less elastic. [As a reminder, less elastic means people don't respond as much to changes in prices – for the post on elasticity see go here.] I don’t have the data to show it, but I’ll bet that prices for those peanut butters went up a bit with less competition.


What else do firms do to grab customers’ attention for those without such strong brand loyalty? Well, they advertise! Whether we choose Jif or not, I think we’ve all heard the phrase “choosy Mom’s choose Jif!” If you don’t know what I’m talking about, there are some pretty awesome old-school commercials you can find on the internet like this one. And not surprisingly, you can now hear commercials saying “Choosy moms AND DADS choose Jif.” So, if you head to the grocery store and you’re not like me with precise preferences, you might hear the jingle for Jif in your head and reach out to grab a jar of that brand. Well done, Jif!


One of the key points about goods that are in monopolistically competitive markets is that firms can change different prices without losing all of their customers. [They each have their own demand curve.] Even if Skipppy is 50 cents less than Peter Pan, I’m going to buy Peter Pan. They are different products to me and thus I’m willing to pay more for one over another.

However, they can’t charge as much as in a world with only one peanut butter firm because they do face some competition. That competition lowers their profits.


Peanut butter more broadly has some serious competition now. Almond butter has been increasing in popularity over the last few years. While not an exact substitute to those previously listed peanut butters, it’s pretty close. This too is likely affecting the demand for each of the regular peanut butter brands – decreasing the demand and increasing the elasticity.


So next time you're eating buying some peanut butter, think about the demand for each. And then make some peanut butter cookies!


Now… here’s the real question. Are you a smooth or crunchy fan?



Peanut Butter Cookies (GF)


I’ve been making these recipes for a few years now; ever since Smitten Kitchen posted about them. The recipe originally comes from the Ovenly cookbook. Ovenly is a delicious bakery in Brooklyn.


These cookies are perfect for any peanut butter fan, AND they are gluten free (bonus!). My main tip is don’t try to mess with them. If you want chocolate in your peanut butter cookie – go for a different recipe like this one or this one. I’ve made and recommend both. Can you tell I’m a SmittenKitchen fan?


Ingredients:


1 ¾ cup (335 grams) packed light brown sugar (if you have a scale, use it – it is so much easier than packing your brown sugar!)

2 large eggs

½ tsp. vanilla

1 ¾ cup (450 grams– or one regular sized jar) peanut butter

Sea salt


Preheat oven to 350.


Whisk together all of your ingredients except the peanut butter and sea salt. Next, whisk in the peanut butter. This can be a little tricky at first because the peanut butter will want to stick to your whisk but keep going and soon it will all get incorporated.


If ready to bake, scoop peanut butter using a small ice cream scoop (or just a spoon) onto baking sheet. If you’re not ready to bake, put in the refrigerator until ready. Once cookie dough is on the baking sheet, sprinkle each one with sea salt.


Bake for around 12-15 minutes in the oven. I like mine soft, so I take them out when they are just beginning to lightly brown on the outside. Cool before eating!


For more great tips, go straight to the expert.