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Supply and Demand in "Forrest Gump"
by Dirk Mateer `

When Forrest Gump enters the shrimping industry he has trouble - finding shrimp. However, when your life is a series of amazing coincidences things have a way of working out. The fishing industry is a highly competitive industry where profits are hard to come by, even for those with experience. However, the twist is that a hurricane washes ashore and it destroys all the other shrimp boats, except Forrest’s. Since Forrest has the only boat left, he gains a temporary monopoly and he catches all the shrimp. In this scene the shrimp are a metaphor for profits and they provide a compelling way of contrasting competitive and monopoly solutions. Forrest Gump keeps his promise to his deceased friend, Bubba, to go into the shrimping business after leaving the army. He invests $25,000 in an old shrimp boat but the going is tough – he only catches a handful of shrimp because of the competition for space in the shrimping water. Forrest tries naming his boat for good luck and he brings on a first-mate, Lieutenant Dan, who unfortunately is less knowledgeable and resourceful than Forrest. The fledgling enterprise is in a bad way and eventually Forrest decides to pray for shrimp. Soon after, Forrest’s boat, Jenny, is caught out in the Gulf of Mexico during a hurricane. Miraculously, the Jenny makes it through the storm while the other shrimp boats, all in the harbor, are destroyed. The film suggests that Forrest’s good luck—being in the right place at the right time—explains how he became a millionaire. But is this realistic? Remember, Forrest was able to enter the business simply by purchasing a boat. To be sure, he would catch more shrimp in the short run, while the others are docked for repairs. However, once the competitors’ boats return, they will catch shrimp and Forrest’s short-run profits will disappear. The reason we can be so confident in this result is that shrimping, with low barriers to entry and undifferentiated product, is an industry that closely mirrors a perfectly competitive market. So, when profits exist, new entrants will expand the supply produced and profits will return to the breakeven level. Having Forrest become a “millionaire” makes for a good movie, but none of the elements are in place to suggest that he could attain a permanent monopoly. Forrest does not control an essential resource; the other shrimp captains will have little difficulty raising capital to repair their boats, and the minimum efficient scale is low.

This Commentary is related to the following Clips:
Supply and Demand in "Forrest Gump" by Director: Robert Zemeckis, Producers: Wendy Finerman, Steve Tisch, and Charles Newirth (1994) When Forrest Gump enters the shrimping industry he has trouble - finding shrimp.