South-Western College Publishing - Economics  
Finally…Facebook for Your Feet
Topic Monopolistic Competition
Key Words shoes, Graffeeti.com, dry erase, tagging.
Full Article

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Reference ID: A167224924

News Story Just when you thought there couldn’t be another bell or whistle that could go on a shoe, here it comes…the shoe that you can write on.

Two entrepreneurs think they have stumbled onto the next big thing: taking advantage of what is known as “tagging,” painting street art on building walls, they have offered people a way of personalizing their own shoes. The shoes have material over the canvas that acts as a dry-erase board, allowing kids to write whatever they want on the shoes…and then erase it when they want. The shoes, known as Graffeeti, come with six dry-erase markers, and are targeted to youths and teenagers.

Their marketing plan is tied to the graffiti phenomenon, and they are cautious not to offend parents, who may not take kindly to the tie of these shoes to street graffiti. The firm is quick to draw a distinction between drawing on their own property, and putting graffiti on public property, or someone else’s private property.

The product wasn’t an immediate success, though. First, the two had to find a material that would work with markers, but wasn’t really expensive. Then they had to design a shoe for it. Their first thought was to use an open-toed sandal, but were convinced to instead focus on a sneaker, so that it would appeal more to the younger crowd. Finally, the packaging had to look right. The shoes come in a box that makes clear the connection the two entrepreneurs are looking for: the shoes’ name is in a font reminiscent of street art.

Questions
Discussion Questions:
1. Assuming that this firm is profitable in the short term, what will happen to it over the long-term? Why?
2. Why does this firm need a marketing plan, if it’s in a competitive industry?
3. Based on the information in the article, what characteristics does the market for footwear have that makes it monopolistically competitive?
Multiple Choice/True False Questions:
1. Assuming that this market is monopolistically competitive, the firm that produces the Graffeeti shoes is a price-taker.
  1. True
  2. False
2. The initial development costs discussed in the article can be considered

  1. Fixed costs
  2. Variable costs
  3. External costs
  4. Opportunity costs
3. Assuming this is a monopolistically competitive industry, in the long run, this firm’s profit will be
  1. The same as its short-run profit.
  2. Positive
  3. Negative
  4. Zero
Source Koerner, Brendan I. “If the Shoe Fits, Write on It.” The New York Times, August 5, 2007.
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