BMW - Bavarian Monopolist at Work
BMW have been fined SFr156m ($163m) by Swiss Competition Authorities for restricting the supply of BMW and MINI cars to Swiss purchasers.
read more...»Unit 3 Micro: Key Diagrams for Business Economics
Here is a revision download containing some key theory diagrams and accompanying explanation for topics in business economics / theory of the firm / market structures.
Key_Diagrams_A2_Business_Economics.pdf
Royal Mail’s refusal to supply
Here is the sub-heading from the report in today’s Daily Telegraph: “Royal Mail is limiting the number of stamps it supplies to retailers now to ensure it profits from record price rises later this month.” The report goes on “Royal Mail confirmed on Thursday that it had imposed a cap on the number of stamps every shop could buy. Retailers said it was refusing to restock them when they exceeded their allocation.” Ian Murray, the shadow postal affairs minister, says that he will be writing to regulator Ofcom about this rationing of supplies.
read more...»Unit 3 Micro: Revision on Entry Barriers
Here is a revision presentation focusing on different entry and exit barriers in imperfectly competitive markets.
Entry barriers:
* Block potential entrants from making a profit
* Protect the monopoly power of existing firms
* Maintain supernormal profits in the long run
* Barriers to entry make a market less contestable
Unit 3 Micro: Revision on Price Discrimination
This is an updated revision presentation on price discrimination in markets designed for A2 micro students.
read more...»Unit 3 Micro: Revision on Monopoly Price and Output
Show and explain how a monopolist maximises profit in a market
read more...»Unit 3 Micro: Monopoly and Economic Welfare
Analyse the equilibrium price and output equilibrium under monopoly and perfect competition. Show and explain the deadweight welfare loss under monopoly and consider when a monopoly might be more productively efficient than a competitive market.
read more...»Unit 3 Micro: Post Office Threatens Smaller Photo Businesses
As the Royal Mail moves towards an initial public offering the business is searching for as many ways as possible of expanding their revenue base to maintain the viability of hundreds of local post offices. One service is the lucrative market for passport and driving licence photos - a product that I suspect has a fairly low price elasticity of demand, I paid £5 for 5 photos in a train station the other week! This Channel 4 news video looks at the battle between the Post Office and independent private sector photo retailers who claim the government is skewing the market against independent shops by giving the Post Office a contract to renew driving licences and threatening to do the same for passports.
read more...»Russia’s monopoly power over gas supplies
It has been a bit chilly in the UK for the last few days, but nothing compared to the temperatures as low as -35 which have hit parts of central and eastern Europe. Of course, they are used to far colder winters than us, and have different ways of dealing with the weather, but reliance on gas supplies from Russia for the majority of their heating fuel leaves countries including Bulgaria, Serbia and Bosnia vulnerable to disruption in that supply.
read more...»Unit 3 Micro: Oligopoly and Duopoly in Bus Markets
The UK Competition Commission has published an important report into the market structure of local and regional bus services in the UK, twenty five years after the industry was deregulated and largely privatised. Coverage of the report can be found here (BBC news).
Largely as a result of a long-term process of consolidation through merger and acquisition, the UK bus industry is found to be highly concentrated with five businesses dominating the sector even though more than 1,200 businesses provides services.
The five largest operators (Arriva, FirstGroup, Go-Ahead, National Express and Stagecoach) carry 70 per cent of those passengers. The CC also found that head-to-head competition between operators is un-common and that-on average-the largest operator in an urban area runs 69 per cent of local bus services - effectively a monopoly position.
Unit 3 Micro: Patent Wars- A Touchy Subject for Apple
This excellent news piece from Ben Cohen at Channel 4 looks at the increasingly aggressive patent war being fought by the manufacturers of the world’s leading mobile phone and tablet devices - the most profitable products in the digital economy. “Where once the giants (Google and Apple) competed on features, they now compete on patents.”
The news feature looks in particular at the intellectual property surrounding the slide-screen technology used by millions to unlock a device. Apple claims the IP to this but a video tracked back to twenty years ago suggests that developers were already thinking of something remarkably similar long before the iPhone came into existence. Can the makers of Android defend legal claims from Apple that their IP has been infringed? And who will end up paying for the enormous legal fees and possible extra licencing costs?
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The Christmas Tree of Integration
A seasonal look at the methods of growth for firms, covering organic growth and the sources of external growth.
read more...»Unit 3 Micro: Examples of Price Discrimination in Action
I tweeted earlier on today asking economics teaching colleagues what examples they like to use when teaching the topic of price discrimination under conditions of monopoly / imperfect competition. Thank you to everyone who contributed!
Unit 3 Micro: Price Discrimination in the E-Book Market
Seth Godin’s Domino Project is an attempt to re-fashion the way in which e-books are published, sold and priced. This blog is particularly interesting for teachers and students who consider different forms of price discrimination. It proposes (at least) three different price tiers:
$1.99 ebooks - a clearing price for the majority of e-books
$5 ebooks. This is the price for bestsellers, hot titles and academic titles required by courses
$10 - $20 ebooks. This is the price you will pay to get the book first, to get it fast, to get it before everyone else
What do you think? How do you see e-book pricing tactics evolving as the market grows? The UK Office of Fair Trading is currently investigating the market for e-books in the UK amid allegations of price fixing / collusion by several leading publishers. You can access the OFT investigation using this link.
Further reading:
Guardian (August 2011): Apple and major publishers face lawsuit over ebook ‘price fixing’
Telegraph: EU raids publishers in ebook price-fixing probe
By way of background - new research has found that the average e-book price of front-list e-books across the world was €10.50 net of taxes. The average price of UK frontlist e-books was €10.80, €1.50 more than equivalent US titles, but less than those in Germany, Spain and France.
Unit 3 Micro: You Sue, I Sue - Patent Wars Explode!
The scale of the legal battles between different businesses in the mobile industry might just be unprecedented. This nifty graphic from the iDownload blog provides an overview of the complex web of litigation - a lawyer’s dream! But if Samsung succeed in delaying the release of the iPhone5 then what might become of their reputation with millions of consumers worldwide? An Indian Summer hat tip to Graham Carter for flagging up this visual.
A2 Micro: Competition Policy
The aim of competition policy is promote competition; make markets work better and contribute towards improved efficiency in individual markets and enhanced competitiveness of UK businesses within the European Union single market.
read more...»A2 Micro: Entry Barriers in Markets
A revised presentation on entry barriers in markets is available here in three formats
read more...»A2 Micro: The Importance of Profit
Profit measures the return to risk when committing scarce resources to a market or industry. Entrepreneurs take risks for which they require an adequate rate of return. The higher the market risk and the longer they expect to have to wait to earn a positive return, the greater will be the minimum required return that an entrepreneur is likely to demand. Economists distinguish between different types of profit – explained below:
read more...»A2 Micro: Market Structure, Conduct & Performance
This updated revision presentation is designed to help students preparing for markets-related topics on A2 economics specifications.
Market Structure Conduct & Performance - revision presentation
Download printable (pdf) slide handout
read more...»A2 Micro: Consequences of Price Discrimination
Who gains and who loses out from persistent and pervasive price targeting by businesses? To what extent does price discrimination help to achieve an efficient allocation of resources? There are many arguments on both sides of the coin – indeed the impact of price discrimination on welfare seems bound to be ambiguous.
read more...»A2 Micro: Examples of Price Discrimination
Price discrimination occurs when a business charges a different price to different groups of consumers for the same good or service, for reasons not associated with costs.
read more...»A2 Micro: Business Growth
This revision note looks at the growth of businesses - we will be adding fresh links at the foot of this blog to recent blog entries on business growth articles and news stories
read more...»Some light relief from revision - this week’s economics TV
Here is a selection of this week’s TV (and a bit of radio) that seems to have some good economics content and might provide a welcome, yet useful, break from revision.
Sunday 15th May: BBC4 8pm, ‘The Secret Life of the National Grid’ - could be worth a look in terms of economies of scale, network externalities, economic growth and the importance of infrastructure
Sunday 15th May: Radio 4 8pm, ‘The Bankers and the Bottom Billion’ - possibly some useful bits in terms of development economics
Monday 16th May: BBC1 8.30pm, ‘Panorama’ - this week’s investigative documentary looks at the illegal trade in waste electronic products following the introduction of regulations governing how we can dispose of such things - probably very good in terms of analysing a type of government failure
Monday 16th May: BBC1 9pm, ‘The Street That Cut Everything’ - looks rather entertaining as well as providing a bit of an insight into topics such as government spending on public goods and goods that generate positive externalities
Monday 16th May: BBC4 9pm, ‘The Golden Age of Canals’ - whilst at first glance this may not seem too appealing, I suspect there are some interesting nuggets in terms of networks and infrastructure spending, as well as a look at why canals fell into obsolence due to the invention of the combustion engine (some creative destruction here!)
Tuesday 17th May: BBC3 9pm, ‘Secrets of the Superbrands: Technology’ - a good look at how monopolies put up strategic barriers to entry in terms of branding and smart use of technology to achieve consumer loyalty
Thursday 19th May: ITV1 7.30pm, ‘The True Cost of a Car’ - a look at the impact on motorists of rising fuel prices and insurance premiums, which will bring in cross-elasticity of demand in a roundabout way
Thursday 19th May: Radio 4, 8pm, ‘The Report’ - a closer look at the operation of supermarkets and why there is opposition to their expansion (useful for looking at the impact of rising market power)
Friday 20th May: BBC2 7pm, ‘Wind Farm Wars’ - probably very useful for those sitting AS Unit 1 this summer in terms of negative and positive externalities of production, and the ins and outs of cost-benefit analysis
Hopefully there’s some light relief in there for everyone! All of the BBC programmes will be available on iPlayer for several days after they’ve been broadcast.
Wiki Revision: A to Z on Monopoly
Here is a revision idea. Take a broad topic - in this case the economics of monopoly - and get students to enter items for an A to Z on that topic. Here is an A-Z relating to monopoly, I am sure we have missed out lots of ideas, can you add some in? If so please leave a comment!
read more...»AS Micro Revision: Market Power
A revision note on aspects of industries in which there is strong market power among one or a few businesses. Most markets are competitive with a number of suppliers (producers) competing for the demand of consumers. Some are more competitive than others. At AS level it is important to understand some of the factors that lead to market (monopoly) power and to evaluate the costs and benefits of markets where monopoly power exists together with the effects of different types of government intervention. The revision note is available to download here: Revision_Market_Power.doc
A2 Micro: Updates on Competition Issues
Here are some links to recent news stories on competition and monopoly issues in the UK and the EU Single Market
read more...»Timetric: Price convergence within the EU
Has the growth and development of the European Union single market and the Euro accelerated a process of price convergence within the EU? Price convergence means that the gap in prices for the same good or service has come down and in theory, having one currency and an open market ought to bring down the extent of price variations. Our Timetric chart below tracks what has been happening to the price convergence indicator. A fall in the measure indicates a coming-together of average prices.
read more...»Dynamic efficiency in the condom market
Designed by and designed for women, L. is among the first woman-run condom enterprise that sells all natural male condoms for women. Inspired by work in Africa where nine out of 10 African countries goes without condom supplies for more than two months here is an interesting example of an attempt to break into the dominant monopoly of the major condom manufacturers such as Durex.
Apple and Goldman Sachs - Worlds Apart
Here is a fantastic piece from John Cassidy - author of Why Markets Fail - a simply terrific investigation of the different ways that we can measure the rate of return for different business activities. Apple employees earn a lot less than Goldmans’, despite generating a much higher return.
Pricing tricks and behavioural economics
Martin Hickman’s Consuming Issues column in the Independent this weekend has a piece on some of the tactics used by retailers to take commercial advantage of many of our behavioural biases.
These pricing tactics include:
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