Monopoly
Carlos Slim - Monopoly and a Licence to Print Money
The latest Forbes rankings of the world’s wealthiest people is the cue for a slew of articles and short features. Rory Cellan-Jones has this BBC news video piece on the wealth attributed to Carlos Slim the Mexican telecoms monopolist who controls 90 per cent of landlines and 80 per cent of mobile connections in that country. A super piece to show to illuminate the chasm in income and wealth in Mexico.
•AS Micro - •Emerging Economies - •Business Economics - •Monopoly - •Economic Growth - •Poverty and Inequality - •Teaching of Economics -
Tags: wealth, inequality, monopoly, mexico, carlos slim
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Apple and patent races
Here is a revealing chart showing the number of patent applications made by Apple contrasted with Google or Taiwan-based cellphone maker HTC. Between 2004 and 2007, when Apple was preparing the iPhone, it filed 507 patents, while Google filed just 67, and HTC filed none, according to the chart. Strikes me that this is a good chart to use when teaching the importance of research and patent protection as a basis for sustaining and exploiting product and process innovations.
•AS Micro - •Business Economics - •Monopoly - •Oligopoly - •Economic Growth - •Economics of Technology - •Teaching of Economics -
Tags: innovation, google, apple, patents
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Microsoft finally promotes choice!
Its been a long time coming, but finally, after years of wrangling with the EU Commission, Microsoft today has begun to offer the consumer choice as to which internet browser they wish to use. After accused of abusing its monopoly position by bundling its own Internet Explorer browser with its operating system, as discussed in this article, it is now offering a pop-up window to prompt people to choose and install one of 12 different browsers or let them stick with Microsoft’s Internet Explorer; although no doubt there will be inertia and a status quo bias. There is also now the fear that the browser choice system will confuse people. There’s no pleasing some people…
•Business Economics - •Competitive Markets - •Monopoly - •Competition Policy -
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Google is the new Microsoft
With an 80-90% market share in online search, Google is increasingly becoming the new Microsoft in the world of anti-trust legislators. It has again come under scrutiny, as discussed here in the FT, this time accused that its search algorithm discriminates against certain competitors.
read more...» •AS Micro - •Business Economics - •Competitive Markets - •Monopoly - •Oligopoly - •Price Discrimination - •Competition Policy -
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Supermarkets accused of price gouging
The Guardian today carries a story about alleged price gouging by the supermarkets. Tesco and Asda refute the charge but they are said to have lifted the prices of a number of necessary purchases for many household goods in the lead up to Christmas.
“Both supermarkets, according to Bridgeman, would be able to use their sales data or information from loyalty cards to identify those purchases customers feel they have to make at Christmas and then target these categories for some steep rises “to extract maximum profit” from shoppers who have neither the time nor capacity to go elsewhere. So household cleaning goods, shaving products, toiletries, lightbulbs, batteries, pickles, sauces, herbs and spices typically consumed at Christmas, favourite seasonal drinks, hangover and indigestion pills, and must-have family presents were all categories seeing dramatic hikes on some lines”
Price gouging involves charging more for consumers whose demand is price insensitive, in other words the price elasticity of demand is low. This would allow the retailers to achieve a higher profit margin on their sales as they extract consumer surplus and turn it into extra producer surplus. The accusation is a strong one more so because many thousands of families on lower incomes may have suffered price hikes at a time when budgets are already under enormous pressure from the effects of the recession and rising utility and energy bills.
More here: How supermarkets can cut ‘thousands of prices’ but your bills may go up
•AS Micro - •Business Economics - •Monopoly - •Market Equilibrium and Price - •Elasticity of Demand - •Nature of Demand - •Teaching of Economics -
Tags: recession, supermarkets, demand, prices, price, profit, retailers, price discrimination, profit margin, consumer surplus
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OFT on Orange T-Mobile
In September last year, this entry discussed the Orange-T Mobile merger; and as expected, the UK’s Office of Fair Trading have today requested an official investigation into it.
“The OFT’s initial view, following consultation, is that the joint venture threatens significantly to affect competition in mobile telecommunications in the U.K.,”
•Business Economics - •Competitive Markets - •Economies of Scale - •Management Issues - •Monopoly - •Oligopoly - •Competition Policy -
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Intel sued by FTC
At the end of December, the US Federal Trade Commission decided to sue Intel for anti-competitive behaviour, accusing the world’s biggest chipmaker of abusing its dominant market position over the past decade. “Intel has engaged in a deliberate campaign to hamstring competitive threats to its monopoly,” said Richard Feinstein, director of the FTC’s Bureau of Competition. This is an excellent case study of the potential anti-competitive behaviour by monopolies in the market place.
•Business Economics - •Competitive Markets - •Management Issues - •Monopoly - •Oligopoly - •Competition Policy -
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Salt Union and Elasticity of Supply
The Big Freeze has caused a huge rise in the demand for grit to treat road surfaces. Most of this demand comes from local authorities and inevitably the supply-side of the market has found it difficult to match production with demand.
The Salt Union is the dominant supplier of rock salt to use on Britain’s roads. Their mine at Winsford in Cheshire is the UK’s biggest rock salt mine and is capable of extracting 30,000 tonnes per week, it has nearly 140 miles of roads some 200 metres below ground. But their plant has been working at full capacity since mid December and the Salt Union has admitted that - despite working 24 hours-a-day seven days-a-week at a maximum output of 30,000 tonnes a week, it is not possible to sustain the unprecedented level of repeat orders coming in. The potash mine at Boulby in Cleveland is the other big source of rock salt in the UK, it too is working at capacity and has opted to divert planned exports to local authorities because of unexpected depletion of stocks. The third main supplier of rock salt comes from Northern Ireland - the Irish Salt Mining and Exploration Company
Stocks of rock salt have dropped sharply and the main supplier is working at capacity - two factors that have made the short run supply of rock salt highly inelastic in response to strong demand. The free market price of salt ought to rise in such circumstances and there is evidence that local councils who have flexible salt supply contracts with the Salt Union are seeing a rise in the cost of salt per tonne. This BBC magazine article tries to unearth some of the detail on salt contract prices.
•Business Economics - •Monopoly - •Market Equilibrium and Price - •Elasticity of Supply - •Nature of Supply -
Tags: demand, prices, supply, production, capacity, stocks, elasticity of supply, salt union
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Cadbury’s share of UK confectionery market melts away
Embroiled in what looks likely to be a protracted takeover bid from Kraft, Cadbury’s has suffered a blow with the news that its share of the UK confectionery market has dipped below 30 per cent for the first time in a while. The Times reports that Cadbury’s chunk of the chocolate market by value slipped 1.7 per cent to 29.8 per cent last month, the first time that it has fallen below 30 per cent all year. Market share of Mars, its biggest rival, slipped 0.6 per cent in the period. There are signs that aggressive pricing of basic chocolate bars by discount retailers such as Aldi and Lidl is having an effect; so too is the growth of sales for own-brand bars offered by Tesco, Sainsbury’s and the ongoing battle for customers between Waitrose and Marks and Spencer. Some customers have complained about a 75% rise in the price of a 230g bar of Dairy Milk in the last 12 months. High world cocoa prices have explained some of the price hike but Cadbury’s tactic of launching a new 100g bar priced at £1 had led some to claim that their are deliberately trying to anchor their prices at a higher level to raise profit margins as a defence against the takeover bid. The decline in market share suggests that chocoholics are more price sensitive than Cadburys might have forecast.
•AS Micro - •Business Economics - •Monopoly -
Tags: price, profit, retailers, cadbury, confectionery, kraft
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The steady (but inexorable) decline of a web monopoly
This new chart from Barclays Capital shows the steady but sustained decline in the global market share for the internet explorer browser.
For years Microsoft has been in dispute with the European Union competition authorities over alleged abuse of its dominant position in the browser market. From now onwards, it will now offer European users a choice of web browser options like Apple’s Safari, Google’s Chrome, and Opera, in addition to its Internet Explorer (IE). Mozilla’s Firefox now has a quarter of the browser marke and Chrome has made a good start in this increasingly contestable market. Google is positioning Chrome as both a browser and an operating system - a real challenge to the Microsoft model.
•AS Micro - •Business Economics - •Monopoly - •Economic Growth - •Economics of Technology -
Tags: competition, internet explorer, apple safari, google chrome, mozilla firefox
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Google Wave: Regulating Industries in the UK
The weekend wave focused on the regulatory agencies in markets and industries, the tools they have to influence prices, incentives, output and profits in different industries and some of the justifications for regulatory intervention and the downsides. We also created a cluster of good examples of competition policy in action during 2009 to bring our regulation / competition notes up to date. The main notes are below and you can also download a pdf version of the current wave - as always these waves are a work in progress!
read more...» •AS Micro - •Business Economics - •Monopoly - •Oligopoly - •Competition Policy - •Government Intervention - •Regulation - •Market Failure - •Teaching of Economics - •Google Wave -
Tags: inflation, prices, competition, price, costs, investment, profit, profits, incentives, regulation
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NHS: Govt failure?
The NHS is back at the centre of hot debate again this weekend, as the Dr Foster report findings generate differences of opinions.
read more...» •Business Economics - •Economies of Scale - •Monopoly - •Government Intervention - •Government Failure - •Health Economics - •Market Failure - •Information Failure - •Merit Goods -
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Google Wave: Benefits and Costs of Monopoly
The number of Google Wavers among the Economics teaching community continues to grow. Last night we generated ideas and resources useful in evaluating the impact of monopoly power in markets - the results are shown below
read more...» •AS Micro - •Business Economics - •Monopoly - •Oligopoly - •Government Intervention - •Government Failure - •Regulation - •Market Failure - •Teaching of Economics - •Google Wave -
Tags: competition, price, costs, production, trade, capacity, profit, innovation, profits, market failure
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Price Discrimination - Teacher Presentation
Fancy watching the Michael Jackson film “This is It” at your local cinema? Demand is strong and box office receipts are booming. As you pay for your ticket keep in mind that your local cinema will be engaging in a number of different forms of price discrimination to convert your hard earned cash into revenue and profit.
Take the admission charges for a showing this coming Tuesday - the 10th of November mid afternoon at three Vue Cinemas across the UK.
For a standard adult ticket there is a £1.95 price variation for these cinemas.
Doncaster (3pm) £4.75
Staines (4pm) £5.95
Greenwich O2 (4pm) £6.45
Fulham Broadway (4.30pm) £6.90
The later showing at Greenwich which restricts customers to Only 18s only will cost an adult £8.75 for a ticket.
We’ve updated our revision presentation on Price Discrimination which is available below:
Launch interactive revision presentation on Price Discrimination
Download pdf of slide handouts
•Monopoly - •Price Discrimination -
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Great examples of near pure monopolies
A big hat tip to one of my students Arno Albici for spotting a superb article in the Economist about a cluster of mid-sized Japanese manufacturers who continue to enjoy near pure-monopoly power in highly specific, high value-added businesses. decades of industry expertise and reinvesting profit to fund high levels of research and innovation continue to give these companies a remarkable competitive strength in the market. The barriers to entry for rival manufacturers are very high and this helps to explain the limited contestability in the global marketplace.
For example:
Shimano earns around $1.5 billion a year by supplying 60-70% of the world’s bicycle gears and brakes
YKK makes around half the world’s zip fasteners by value,
75% of motors for hard-disk drives in computers come from a firm called Nidec
90% of the micro-motors used to adjust the rear-view mirror in every car are made by Mabuchi
“Many technology products have become commodities, but certain components have not, since they require continual innovation. So entry barriers to the business of making them remain high, and although the margins on the final goods have deteriorated, the margins on specialised, high-end components are still juicy.: Much more here
•Business Economics - •Monopoly - •Economic Growth - •Economics of Technology - •Manufacturing Industry - •Teaching of Economics -
Tags: manufacturing, profit, innovation, barriers to entry, pure monopoly
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OFWAT plans to turn the tap on water company prices
The Times today has an interesting article on the power battle between the water industry regulator OFWAT and the regional monopoly providers such as Thames Water. It appears that a much tougher pricing regime is planned for the utilities leading to cuts in the real price of water supplies for consumers.
“Every five years, Ofwat sets limits on prices that water companies in England and Wales can charge. For 2010-15, it has proposed that, before taking inflation into account, bills should be reduced for many customers, bringing the average annual water and sewerage bill down by 4 per cent from £344 to £330 by 2015. The water companies had wanted a £28 rise to fund their business plans.”
OFWAT wants the utilities to invest more in in improving drinking water quality, cutting leakage levels and raise the number of metered households from 36 per cent to 50 per cent (in a bid to control water usage). But will imposing real price cuts help achieve this objective? The aim is to have a pricing regime that forces the utilities to raise productivity and cut out as many inefficiencies as possible.
Water is a good example of where a strong regulator is needed because of the absence of competition - after all consumers can’t switch supplier if they are given a poor service.
•Business Economics - •Monopoly - •Government Intervention - •Regulation -
Tags: inflation, price, monopoly, price capping, ofwat
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Monopoly and Entry Barriers - Teacher Presentation
This updated presentation provides an overview of the role of barriers to entry in protecting the position of a monopolist.
Launch interactive version of presentation
•Business Economics - •Competitive Markets - •Monopoly -
Tags: monopoly, entry barriers
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Monopsony Power - Supermarket Bullies?
Many thanks to Janis Thompson at Bristol GS for suggesting this terrific 3-minute video on the battle between supermarkets and their hard-pressed suppliers. A great range of business and economics topics in here, including an obvious starting point for discussing the ethical issues raised in the clip
Download student worksheet (including video link)
•AS Micro - •Business Economics - •Monopoly - •Market Failure -
Tags: supermarkets, economics, monopsony, supply chain
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Ticketmaster-Live Nation merger provisionally blocked by the CC
This morning, the Competition Commission announced that it has provisionally moved to block the merger between Ticketmaster (the world’s largest ticketing firm) and Live Nation (the world’s biggest concert promoter).
read more...» •Business Economics - •Competitive Markets - •Monopoly - •Oligopoly - •Competition Policy - •Government Intervention - •Regulation -
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Oracle-Sun merger
Despite getting clearance from the U.S Department of Justice, earlier this month, Europe’s top competition regulator today opened a full, in-depth inquiry into the proposed $7.4bn acquisition of Sun Microsystems by Oracle, citing concerns about the potential for anti-competitive effects if the merger went ahead unconditionally.
•Business Economics - •Competitive Markets - •Economies of Scale - •Monopoly - •Oligopoly - •Competition Policy - •Economic Growth - •Economics of Technology - •Government Intervention -
Tags: prices, competition, merger, takeover, oligopoly, competition commission, european union, contestability, oracle, anti-competitive
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Browser Wars!
Over the summer, it seems that the browser wars have intensified, and Microsoft’s Internet Explorer’s virtual monopoly has its days numbered. Earlier this year, Google brought out its Chrome browser, to rival Microsoft’s Internet Explorer, and today it was announced that Google have signed a deal to get it in to Sony PCs.
•Business Economics - •Competitive Markets - •Monopoly - •Oligopoly - •Competition Policy - •Economic Growth - •Economics of Technology - •Market Equilibrium and Price - •Price Mechanism in Action -
Tags: competition, google, contestable market, creative destruction, bing, internet explorer, firefox, chrome, browser
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Economics Snapshot - Google draws away from Microsoft and Yahoo
This BBC report discusses a deal announced between Microsoft and Yahoo.
“Microsoft’s Bing search engine will power the Yahoo website and Yahoo will in turn become the advertising sales team for Microsoft’s online offering”
This is an attempt to compete head on with the growing market dominance of Google in search engine queries but as the chart above shows there is a clear divergence between the market share of Google and the combined market share of Microsoft and Yahoo.
Microsoft and Yahoo’s combined share of U.S. search queries was 28% in June, down from 30% a year ago, according to comScore.
•Business Economics - •Economies of Scale - •Monopoly -
Tags: google, market share, microsoft, monopoly, yahoo, contestable market, market dominance, search engines
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Contestable Markets - Spotify takes on iTunes
Here is the latest move in the battle for position, power and profitability in the market for digital downloads. Spotify the music streaming service based in Sweden has submitted an application to Apple for their iPhone that will allow their premium service users to search for music on the Spotify playlists and download their free library of songs onto their mobile phone.
Spotify say that the free application for the iPhone has met all of the developer guidelines required by Apple. The application will not allow users to buy music from the iTunes online store and herein lies the stumbling block! Will Apple really allow potentially one of its major rivals in the market place to find a home on the ultra-popular iPhone? Their dominance of the mobile phone music market looks too strong and too profitable to allow this new application. Spotify has become tremendously popular within a short space of time - it is claimed that they have over two million users in the UK alone.
*The advertising-funded version of Spotify is free of charge
*The premium service costs Euro 9.99 a month
*Apple has already approved several other music services such as Last.fm, Deezer and Pandora but these are much smaller competitors
*Music technology experts say that one of the main advantages of the Spotify application for the iPhone is offline play - push a button to download your Spotify playlists containing up to 3,333 songs to the app for playing whilst not connected
Here Rory Cellan-Jones from the BBC test drives the new Spotify application
And this Guardian editorial sings the praises of being able to listen to music without paying over the odds
Update: In August 2009 Apple announced that it had approved the bid for an iPhone app from Spotify. Details here
•AS Micro - •Business Economics - •Monopoly - •Economic Growth - •Economics of Technology - •Market Equilibrium and Price - •Nature of Supply - •Price Mechanism in Action -
Tags: costs, profit, itunes, apple, contestable markets, music downloads, spotify, digital rights, applications
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Using the Big Question
The Big Question feature in the Independent is a reassuringly regular source of useful and interesting background articles. There is often an economic / environmental /social / business perspective to their choice of topics in the news. And the Indy handily provides some vivid graphics that can serve well as student handouts or a prompt for a data response question. Here is a brief selection of recent features
Why is inequality rising in the UK? (July 2009)
Can the G8 meet its climate change targets? (July 2009)
What has gone wrong between the Chancellor and the Governor? (June 2009)
Will there be cuts in public spending whichever party is in power? (June 2009)
Why are games consoles the focus of the battle between computer giants? (June 2009)
•Monopoly - •Cost Benefit Analysis - •Economic Growth - •Economics of Technology - •Environmental Economics - •Government Intervention - •Keynesian Economics - •Poverty and Inequality - •Teaching of Economics - •UK Economy - •Fiscal Policy -
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Microsoft to offer users a choice of browsers
The battle between Microsoft and the EU competition commission seems to have gone on for an age. In the latest move Microsoft has agreed to contact European users of its Windows software to a choice of Web browsers. The browsers featured in the ballot would be determined by market share; the five with the highest—at the moment, Internet Explorer, Firefox, Apple Inc.’s Safari, Opera and Chrome—are almost certain to be displayed. What is critical is the number of web users who then decide to switch to an alternative browser and click on an option for Microsoft IE to be removed as the default web browser. My default choice is now Firefox from Mozilla. Windows 7 is due for release on the 22nd of October.
•AS Micro - •Business Economics - •Monopoly - •Competition Policy - •Economic Growth - •Economics of Technology - •Government Intervention - •Regulation -
Tags: competition, microsoft, internet explorer, choice, firefox, browsers
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OFWAT wants cuts in the real cost of water bills
The water regulator OFWAT has published their latest five-year price capping proposals for the UK water industry. They want household bills to fall in real terms for water customers in England and Wales - positive news for people struggling to pay their utility bills but not so for shareholders in the water companies who have become renowned for their generous dividends on the back of price increases over and above inflation in past years.
read more...» •AS Micro - •Business Economics - •Monopoly - •Competition Policy - •Government Intervention - •Maximum Prices - •Regulation -
Tags: price, risk, investment, utility, price capping, rate of return, ofwat, water, sewerage
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Economics Snapshot - Tesco and Competition
*Tesco has a 31 per cent share of the UK grocery market
*It is the dominant supermarket in 72% of Britain’s 121 post-codes
*In April 2009 Tesco reported a 10 per cent rise in underlying annual pre-tax profits to £3.13bn
*Annual sales were £59bn
Source: The Times (17-07-09) and the Financial Times (04-09)
•AS Micro - •Business Economics - •Monopoly - •Quirky Trivia -
Tags: tesco, profits
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Unintended consequences of painkiller innovation
The retail price of over-the-counter painkillers fell sharply a few years back when one of the last legal price-fixing agreements covering pharmaceutical products came to an end. Within days the cost of a packet of soluble aspirins had halved as supermarkets rushed to bring their own-label products to the market space. Cheaper pain-killers have been a benefit to millions of people who paid over the odds to chemists and Big Pharma for cold remedies and relief from the pain of toothache and other ailments. But one of the unintended consequences of tough competition in the market has been the emergence of yet more powerful tablets.
How many of us when faced with an array of cold-remedies now opt by default for the ‘extra strength’ variety? The manufacturers know that putting simple phrases such as “new improved”, “maximum strength” and “fast acting, dual action” on the packets are often enough for consumers to trade up to strong pain-killing products and pay a premium price.
But one of the consequences of research and development in the over-the-counter market for pain remedies has been growing evidence of consumer addiction. John Gapper writes about this in this blog.
Codeine present in many products such as Nurofen Plus and Solpadeine Plus in particular is causing great concern. A House of Commons report published earlier on this year recommended that painkillers containing codeine should be sold in smaller packets and available only after consultation.
•AS Micro - •Business Economics - •Monopoly - •Oligopoly - •Market Failure - •Information Failure - •Market Equilibrium and Price - •Nature of Demand -
Tags: supermarkets, competition, price, painkillers, dependency
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Will O2’s network be able to carry the traffic?
O2 has won the exclusive contract to sell the new Palm Pre in Britain and the contract means that O2 will be the only UK network selling the Palm Pre and Apple’s iPhone. These exclusive deals for O2 will consolidate its position as the dominant network service provider for smart phones. O2’s parent company Telefonica will also sell the phone exclusively in Spain, Ireland and Germany, buyers of the new phone will be tied into a two-year deal. But given the huge demand for these data hungry devices, will O2’s network capacity be sufficient to cope with the expected surge in phone demand and usage when the Palm Pre arrives in Europe this autumn? Existing iPhone users may find that network access speeds and reliability will suffer and thousands of extra users join the O2 system. More here from dot.life blog written by Rory Cellan-Jones.
•AS Micro - •Business Economics - •Monopoly - •Oligopoly - •Economic Growth - •Economics of Technology - •Market Equilibrium and Price - •Elasticity of Supply - •Nature of Demand -
Tags: demand, capacity, iphone, o2, contract, palm pre, lock in, network speed
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East Coast Rail Line is Nationalised
The profitable East Coast rail line north of Newcastle heading into Northumberland towards Berwick upon Tweed is one of the most glorious on the entire British rail network. There are stunning views looking out to Holy Island, Bamburgh Castle and the delightful village of Alnmouth. And as trains pull out of Durham there is a fantastic panorama featuring Durham Cathedral, a view to take the breath away whatever the weather. Even the most hardened commuter is tempted away from their laptop to soak up the view. It is unlikely that senior executives at National Express will be in the mood to savour these delights since the government is taking the East Coast rail line that runs from London to Edinburgh into public ownership.
read more...» •AS Micro - •Business Economics - •Monopoly - •Competition Policy - •Government Intervention - •Recession Watch! - •Transport Economics -
Tags: recession, costs, debt, nationalisation, national express, revenue, winners curse, premium passengers, rail franchise
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