Competitive Markets

Has competition in postal services delivered?

Two years on from the liberalisation of the postal services industry, has this supply-side policy to make the market more contestable made any noticeable difference to the quality of service, prices and investment in delivery? A new report casts doubt on the changes to the industry since the market opened up to competition at the start of 2006 to businesses such as UK Mail. Robert Peston reports for the BBC in this video clip. His feature asks whether the universal service provision is a millstone round the neck of the Royal Mail which remains in deep financial trouble.

Farewell Microhoo, we never knew you…

After three months of tight negotiations, it has finally been announced that Microsoft will walk away from its bid for Yahoo because the two cannot agree on an acceptable sale price. The whole world has been watching this proposed merger intently, as it may have been the deal to change the plate tectonics of the technology age. 

Tesco adds to contestability in digital downloads

News today of yet more competition in the increasingly contestable market for music and film downloads. Tesco Digital is launching a new platform-neutral service which eventually will offer 3.3m music tracks compatible with iPods and other MP3 players. At the moment, the downloable tracks are only available in windows media player format. The move heralds yet more pressure for high street retailers such as HMV who are also building an online presence. Do you think that Tesco’s move will be a success?

Will they, won’t they?

The Delta-Northwest farce finally appears to be drawing to a close. The two have been discussing a merger for over two months now, being plagued with seniority list integration issues. Today was the closest the deal has ever reached, with a possible announcement about its completion as early as tomorrow. If given the go-ahead, this would create the world’s largest airline. This has both United and Continental quaking in their boots, with talks of a possible merger between the two. Both Delta and Northwest shares rose over the day.

Competition or informal price fixing?

Sainsbury’s is completely awash at the moment with price check stickers on hundreds of branded grocery items from rice to sauces, from pizzas to soups. On the surface a sign that the supermarkets are competing with each other to keep down the prices of basic items at a time when household budgets are being stretched (the big marketing push at Sainsburys at the moment is the idea that you can feed a family for a fiver). 

Revision: Console wars

I will be using this table with my A2 microeconomics group as a revision exercise - partly to discuss competition in a contestable market; the factors that determine pricing power and other micro concepts such as elasticities of demand, economies of scale and hardware product cycles. How else could the data be used? Suggestions please! I have made the original word document available for download below.

Console prices
Console_Prices.doc

Contestable Markets - Online Music

When was the last time you went into a store or ordered a CD online? The BBC web site reports that iTunes has overtaken Walmart as the biggest retailer of music in the United States. Over 50 million people have used iTunes since its inception but the market for downloadable music is becoming more and more contestable as the major players line up for a share of the supernormal profits that are available. MySpace has entered into a joint venture with Universal, Sony BMG and Warner and will now compete with rivals such as Last FM (a free streaming service) eMusic and Napster. According to the new data (which covers the month of January) 48 percent of US teenagers didn’t buy a single CD in 2007, compared to 38 percent in 2006. Paid music downloads in the USA accounted for almost 30 percent of all music sold in January.

Music sales in the USA (for Jan 2008)

iTunes Store - 19 percent
Wal-Mart - 15 percent
Best Buy - 13 percent
Amazon - 6 percent

How important do you think ‘first mover advantage’ is in this market? As a dedicated iTunes user I haven’t even looked at competitor services for many months now.

A new era for air travel

Today marks a momentous triumph for competition over protectionism. Anti-competitive practices dating back to the 1944 Chicago Convention will finally be scrapped for the new Open Skies agreement between the European Union and the United States. Currently, only British Airways, Virgin Atlantic, United and American Airlines are legally allowed to offer direct flights from Heathrow Airport to the US. But after the deregulations of transatlantic air travel, the market will at last be open to competition from challengers.