Islands = Monopolies

The last few weeks the rise in the price of goods has caught my eye. Things that I used everyday in the states cost quite a bit more in Micronesia. Two of those reasons are obvious to me. The first one is the cost of shipping things. It doesn't take a genius to recognize the fact that shipping Tillamook Cheese to Pohnpei, Micronesia costs more than shipping it to Salem, OR. The second obvious reason for higher cost of goods is small population and a small market for the things I'm interested in. There are about 110,000 people who live in the FSM, 35,000 people who live in Pohnpei and less than 10,000 who live in Kolonia, where we live. I am not sure what percent of locals purchase things at the grocery stores I shop. It could be as high as 50% or as low as 10%. The less obvious reason for the high cost of goods is Monopolies, and not the game sold at Toys R Us.

In small town USA there is probably a Wal-Mart, or some other large store, within a short drive. I'm not saying this is always the case, there are always exceptions. However if you live on an island your opportunities are limited to the size of the island. So small island = small opportunities. For example, here in Pohnpei there are two gas stations both operated by the same company, Mobil. Currently Gas is $5 per gallon. Mobil also supplies Pohnpei Utilities with Diesel that powers the whole island (Yes, the whole island is powered by a ginormous diesel generator). There is no room in the market for another gas company. If one where to move in, both the new one and Mobil would not make enough money. Another example is Continental. The only airline to come to Pohnpei is Continental, they have a monopoly in Micronesia and abuse it in more ways than just high prices. It costs $1100 to fly from Pohnpei to Honolulu but less than $250 to fly from Honolulu to Portland. If you don't want to pay that much you'll have to swim because Continental is the only airline to come to Pohnpei, so they can charge whatever they want. The only way to combat high prices is to have government regulation or competition. I am opposed to regulation and believe that the market is not big enough to handle two airlines. But the example that hits closest to home is the fact that there are basically two grocery stores here. There are more but the two large ones supply the smaller ones. When we first arrived we paid $15 for a case of milk. A case is 12 cartons, 1 liter each. The price has risen every few months and yesterday I paid $23.50 for a case (actually I bought two cases because last time they ran out and didn't have any for over a month). I would think that these two stores would compete for customers but that doesn't seem to be the case. The store nearest us, Palm Terrace, started selling eggs for $3 a dozen. Consequently we started getting eggs at the other store, Ace Commercial. Who sold them for only $2.50. Palm Terrace is much closer to our house so we go there several times a week and I noticed that the price of eggs didn't come down, it went up. First to $3.50 now to $4. Yesterday eggs at Ace commercial where $3.25.

The other thing I've noticed is that prices on goods never come down. The only thing I've seen on sale was expired cereal and canned goods. The price of gas goes up every time the price of crude goes up but it never goes down. Even after Christmas, New Years, Valentines day and other holidays things don't go for a reduced price.

How can locals afford to buy anything? I believe the reason for this is that in this culture only foreigners pay rent or mortgages. When locals get married the family gives them either a house or some land on which to build a home. Thus they have quite a bit of money to spend on consumables.

Bananas still cost 25 cents a pound though : )