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
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: 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: Tesco Behaving Badly - Price Anchoring
On paper, it sounds like a totally reasonable price strategy from the market leader in an oligopolistic market - after announcing their worst sales figures in nearly 20 years, Tesco’s came out with a price cut promotion “The Big Price Drop”. The supermarket – which has pledged to spend £500 million on the high-profile promotion – has promised customers that it would reduce the price of 3,000 essential products across its stores.
read more...»Economics on YouTube
A useful clip for AS micro: barter economies. Or, alternatively, for A2 micro: perfect price discrimination.
Unit 1 Micro: The Price of Football
The BBC’s new Price of Football survey offers an excellent opportunity to use wide differences in the cost of attending football matches across the length and breadth of the UK. A summer hat tip to Ben White (newly installed Head of Economics and Business at St Peter’s School in York) for flagging up this resource on the BBC web site - it is ideal stimulus material for generating a discussion on different pricing tactics, price elasticity of demand and income inelasticity of demand in the soccer industry.
A2 Micro: Price Discrimination
Our updated presentation on price discrimination is available 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...»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...»Gender Pricing in Insurance
The European Court of Justice has ruled that gender “can’t be used as a factor” when working out the cost of insuring someone.
“The use of actuarial factors related to sex is widespread in the provision of insurance and other related financial services. In order to ensure equal treatment between men and women, the use of sex as an actuarial factor should not result in differences in individuals’ premiums and benefits.”
Lots of coverage about this today most focusing on the risks that insurance premiums for women drivers who are by-and-large safer drivers on our crowded roads will now go up. But my instinct is that insurance companies for far too long have been discriminating against younger male drivers, many of whom have a higher disposable income that women of the same age (and the insurance companies know this).
Instead of getting worked up about this EU ruling more attention should be given to the much bigger problem of the millions of people in the UK who decide (for one reason or another) to drive uninsured vehicles - that is a danger and a risk that affects us all.
Guardian: Discrimination ruling: Fast cars, sex and insurance
Telegraph: UK insurers criticise European ban on gender-based pricing
EU ruling on sex equality: price differentiation, price discrimination or an Unintended Consequence?
If it can be statistically proved that women have fewer car accidents than men, is it fair that they should pay the same for their vehicle insurance? And if a man and a woman have paid the same contributions to a private pension scheme during their working lives, but after they both retire at 65 the man is statistically likely to live for a shorter time that the woman, is it reasonable that the man receives the same monthly pension payment as the woman for the rest of his life?
read more...»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:
read more...»Let’s hear it for the girls!
My better half and I recently popped along to the cinema to see ‘Made in Dagenham’.
The film is set in the late 1960s and depicts the true story of the 200 female machinists and their fight for fair pay at the Ford plant in Dagenham, Essex in the late 1960s. The film is an archetypal feel-good piece of social history, and packed with interesting Economics. Teaching to the syllabus alas does not always afford us the luxury of discussing relatively recent Economic history – this is a real shame. An appreciation of these events I feel can really help to bring several topics alive. Encourage your students to go and see the film – it’s all there:
1/ Monopsony – In the late 1960s Ford employed 55,000 people in Dagenham – 54,800 of them were men
2/ Trade Unions and the Supply Side – wage negotiation and industrial action
3/ Legislation – The dispute was a catalyst for what became the 1970 Equal Pay Act: something that still provokes controversy; today – 40 years later – pay disparity still remains an issue (always extra fun to discuss this in an all boys’ school!)
Cinemas are also of course excellent places in and of themselves as regards turning the restless mind to Economics issues. This particular establishment provides sofas for customers to lounge upon, and one is able to order items from the menu via a handy waiter/waitress service. This of course has several ramifications re the business model the firm operates. I marvelled at the application of cross price elasticity as I took in the outrageous prices on the menu! My thoughts turned to price discrimination as I pondered the ticket price! I glanced round approvingly at the civilised audience, gathered together in part via the power of the price mechanism!
I can’t finish without mentioning the fact that the soundtrack during an advert for a well known brand of Corn Flakes was provided by one of my favourite bands … Primal Scream, a Scottish alternative rock group. I almost choked on my Sauvignon Blanc as I vacillated between thoughts of ‘sell out!’ and the use of multiple revenue streams to maximise the value of a well-known product. I have to tell you – the irrationality of the fan won the day …. Oh Bobby, how could you?
Profit margins for ticket touts
Here is a good piece to read on the returns for ticket touts in the UK - markets in action and good material to use when discussing price gouging / price discrimination.
Unit 3 Micro: Efficiency and Price Intervention in Markets
In recent times the European Union Competition Commission introduced maximum prices for the roaming charges made by mobile phone service providers. These are the rates charged by one operator to another to enable its customers to make calls while visiting another country.
Evaluate the view that a policy of price capping for European Union mobile phone operators will lead to an improvement in consumer and producer welfare (25 marks)
read more...»Price discrimination - Tesco and One Stop
The Times has an article on alleged price discrimination tactics by Tesco using it’s One Stop branches.
read more...»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...»Price comparison sites…
An interesting discussion out of a random statement at the dinner table last night…
There’s a firm called BetGenius which provides real-time odds comparison services.
Lots of discussion ensued on the effect of perfect information vs imperfect information. Given the surge in price comparison websites in recent years, one would expect the price of bets (or insurance, electricity) to converge to similar levels, as perfect competition predicts.
read more...»OFT pricing investigation
When discussing the role of the OFT to protect the public interest, this announcement may be an interesting discussion point: This week it announced it would investigate various online pricing strategies such as drip pricing; time-limited sales; and reference pricing.
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
Swine flu vaccines and elasticity of supply
The scale of the ordering of swine flu vaccinations by governments across the world is eye-wateringly large! GlaxoSmithKline plc - one of the world’s biggest pharma companies has reported that governments around the world have so far ordered 440 million doses of its pandemic swine-flu vaccine Pandemrix. GlaxoSmithKline has been engaged in a tense race to get new swine flu vaccines onto the market fighting the likes of Sanofi-Aventis, Novartis AG and AstraZeneca to win contracts for public health programmes. For students of the price mechanism it is a fascinating example of many supply and demand concepts at work:
The challenge of scaling up production to meet huge levels of demand - this has involved out-sourcing
The relative importance of fixed and variable costs in developing and manufacturing/distributing a new drug
The elasticity of supply of vaccines to meet short term health requirements
The oligopolistic race to win and protect market share
Economies of scale in production
The balance of power between the major buyers and the multinational drug suppliers
Price discrimination tactics
The Guardian reports that:
“The company makes the vaccine in Dresden and Quebec but the demand is so great – about 60% higher than for usual seasonal vaccines – that it is also outsourcing production to third-party manufacturers.”
According to the Wall Street Journal
“Glaxo hasn’t released information on cost per dose of the vaccine. However, Chief Executive Andrew Witty said in July that Glaxo was charging wealthy nations $10.26 per H1N1 vaccine shot and developing countries less. The drug maker is also donating 50 million doses to the World Health Organization.”
The Independent reports that
“The United States has begun a massive campaign aiming to vaccinate 250 million people against the illness by year’s end.”
And the Times reports that “total booked orders for the drug are worth about £2.2 billion — a significant sales and profit windfall as a result of the swine flu epidemic”
Hold the phone!
For those of you are thinking of buying an iPhone, you would probably do well to wait until Christmas it seems. The exclusivity agreement between Telefonica-O2 and Apple is set to expire in the next few months, which could lead to an all-out price-war in time for the festive season. As the exclusivity is removed, it should make the market more contestable, and the price should fall.
read more...»Newspapers and Micropayments
Geoff has written an excellent piece for econoMAX, our digital magazine for A Level Economics Teachers and Students on whether and how newspapers should charge for content. For those of you who are new to econoMAX, here is the article:
Micropayments and the Economics of Newspapers
Revision - Price Discrimination (presentation)
Here is a revision presentation on price discrimination.
read more...»Positive Price Discrimination at South Africa 2010
As you can see from several entries on the IB Economics Blog today, Africa is suffering a significant reduction in growth in the global slowdown. The IMF summit taking place in Tanzania this week is looking for ways to combat this. However, demand for some scarce goods remains very inelastic, and it seems likely that even in the midst of the gloom tickets for the football World Cup in South Africa in June-July 2010 will be over-subscribed. Ticket prices for sports events offer opportunities for price discrimination and maximum price setting, and the ticketing process for the World Cup in South Africa takes advantage of this on behalf of local people rather than the supplier, and seeks to ensure that some consumer surplus is available to them. This could be an important factor for a country with almost 22% unemployment, two quarters of negative GDP growth, GPD per capita of $10,400 in 2008 but a GINI index of 65 (2005) indicating significant inequality in the distribution of income (compared with 38 in the EU).
read more...»Requiem for DRM
Most people who by default use iTunes are unaware that it is about to change, in a big way. At Macworld, the most important technological conference for Apple consumers (which ironically will no longer feature an appearance of Apple from now on), Phil Schiller (Apple’s vice president of product marketing) has announced that two major changes were going to be made with the most used music download program in the world. Firstly there would no longer be any DRM, and secondly there would be a new three-tier pricing system. Of course all Apple aficionados who were present at the conference rejoiced, but that is a something that can be ignored since they would have done so no matter what the Apple representative on stage would have said (yes, they’re that devout to the company…).
read more...»
