A basic tenet of micro theory: a firm should shut down if the price for its output is so low that it cannot even cover variable costs.  Alligator skins are fetching “prices far lower than in the past and lower even than the price of raising an alligator.”  Budding alligators farmers should turn their firms into zoos not Jimmy Choos.

At least inputs into alligator bags, shoes and watch straps are very cheap and competition between producers should make Choos and Blahniks cheaper, offering one possible resolution to the annual Xmas shopping conundrum for many confused men.  Typically but not in this case:

“Every time I go to Neiman Marcus and say every year the price is going up, they fight me tooth and nail,” said George D. Malkemus III, the president of Manolo Blahnik. “They say, ‘I’m not going to spend $4,000 for an alligator shoe.’ ”

One popular theory: Hermes is fast becoming the dominant player in the supply chain from Florida to Paris.  The firm has scarfed up many tanneries and has the market power to set the price to farmers low and the price to Blahniks high.  The middleman reaps the rents.

I don’t think they are any men’s Choos and anyway I’m quite happy in my Merrell’s.  But the Xmas shopping issue awaits….