http://www.tutor2u.net/blog/index.php/economics/ en tutor2u.net Copyright 2012 2012-02-12T07:41:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-samsung-and-lg-fined-for-price-fixing http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-samsung-and-lg-fined-for-price-fixing#When:17:12:40Z As A2 microeconomists approach their Unit 3 exam, they need to make sure they have good examples to support their analytical theory and should therefore be interested in the news from South Korea where the antitrust regulator has fined Samsung Electronics and LG Electronics for conspiring to fix the prices of some appliances. The regulator said the two firms held secret meetings in 2008 and 2009 to agree on prices for washing machines, flat-panel TVs and laptop computers and has fined Samsung 25.8bn won, while LG was fined 18.8bn won. A nice relevant example of collusion, price fixing and the government’s response to this anti-competitive behaviour   A2 Micro, Business Economics, Oligopoly, 2012-01-13T17:12:40+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-oligopoly-and-duopoly-in-bus-markets http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-oligopoly-and-duopoly-in-bus-markets#When:15:01:48Z 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. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, Competition Policy, Market Equilibrium and Price, Nature of Supply, Transport Economics, UK Economy, Regional Economics, 2011-12-20T15:01:48+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-patent-wars-a-touchy-subject-for-apple http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-patent-wars-a-touchy-subject-for-apple#When:17:24:57Z 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?   AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Monopoly, Oligopoly, Economic Growth, Economics of Technology, European Economy, Single Market, Government Intervention, Regulation, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, 2011-12-16T17:24:57+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-tacit-collusion-in-the-supermarket http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-tacit-collusion-in-the-supermarket#When:23:39:44Z What do students make of the current price match / big price drop schemes offered by many of the leading food retailers in the UK? On the surface the brand price match scheme shown in the picture below looks like a good deal for consumers in this time of financial hardship and distress. But what it this ‘parallel pricing’ serves merely as a form of tacit collusion with prices on a range of products actually higher than they might be without the facade of price comparisons and discount voucher compensation? AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, 2011-11-27T23:39:44+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-brand-loyalty-in-mobile-phones http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-brand-loyalty-in-mobile-phones#When:09:33:20Z Brand loyalty is hugely important in all kinds of industries and markets. The costs of acquiring a new customer vastly outweigh the expense of selling more to existing buyers and most of the mobile phone suppliers in this oligopolistic industry focus an enormous effort in building brand identity and brand loyalty to reduce the rate of customer churn (people who switch brands). AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, 2011-11-27T09:33:20+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-patent-wars-might-stifle-innovation http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-patent-wars-might-stifle-innovation#When:09:22:56Z In this six minute piece, Rory Cellan-Jones from the BBC looks at the surge in legal actions concerning alleged patent infringements. Intellectual property lawyers are making huge sums from the trend but small and medium sized enterprises especially in technology spaces might have less scope, freedom and resources to innovate as a result. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, 2011-11-23T09:22:56+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-examples-of-price-discrimination-in-action http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-examples-of-price-discrimination-in-action#When:13:41:47Z 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! AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Monopolistic Competition, Monopoly, Oligopoly, Price Discrimination, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, 2011-10-31T13:41:47+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-price-discrimination-in-the-e-book-market http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-price-discrimination-in-the-e-book-market#When:09:51:07Z 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 Read paying for first 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. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Behavioural Economics, Game Theory, Business Economics, Monopoly, Oligopoly, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, 2011-10-31T09:51:07+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tescos-behaving-badly http://www.tutor2u.net/blog/index.php/economics/comments/tescos-behaving-badly#When:21:23:59Z 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. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Price Discrimination, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, 2011-10-17T21:23:59+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/collusion-in-the-classroom http://www.tutor2u.net/blog/index.php/economics/comments/collusion-in-the-classroom#When:07:20:51Z Today we played a variety of ‘prisoner’s dilemma’ games with my U6th economists, highlighting the game theory element of oligopolistic markets. (A nice mix of collusion between the pupils was apparent, coupled with the usual cheating on agreements and back-stabbing – always fun to have in the classroom!) AS and A2 Specifications, EdExcel Economics Unit 3, A2 Micro, Behavioural Economics, Game Theory, Business Economics, Oligopoly, 2011-10-08T07:20:51+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-amazon-launches-the-kindle-fire http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-amazon-launches-the-kindle-fire#When:06:01:45Z In the increasingly competitive and contestable market for tablet devices, leading online retailer Amazon has launched the Kindle Fire.   AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Economies of Scale, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2011-10-01T06:01:45+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-you-sue-i-sue-patent-wars-explode http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-you-sue-i-sue-patent-wars-explode#When:20:34:00Z 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. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Monopoly, Oligopoly, Economic Growth, Economics of Technology, Teaching of Economics, 2011-09-25T20:34:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/slicing-up-the-apple-globalisation-graphic1 http://www.tutor2u.net/blog/index.php/economics/comments/slicing-up-the-apple-globalisation-graphic1#When:07:16:01Z This lovely graphic from the Economist gives a visual picture of some of the forces of globalisation at play in the manufacture of the iPhone. I was particularly surprised by the contribution to components by Samsung, which is also one of Apple’s main competitors in the Smart Phone market. There are also some useful stats underneath the graphic which would be great in a lesson where concentration ratios and market structures are being introduced. A2 Macro, A2 Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Global Economy, 2011-08-22T07:16:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/slicing-up-the-apple-globalisation-graphic http://www.tutor2u.net/blog/index.php/economics/comments/slicing-up-the-apple-globalisation-graphic#When:07:16:00Z This lovely graphic from the Economist gives a visual picture of some of the forces of globalisation at play in the manufacture of the iPhone. I was particularly surprised by the contribution to components by Samsung, which is also one of Apple’s main competitors in the Smart Phone market. There are also some useful stats underneath the graphic which would be great in a lesson where concentration ratios and market structures are being introduced. A2 Macro, A2 Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Global Economy, 2011-08-22T07:16:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-oligopsony-dairy-losses-drive-farmers-from-the-fields http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-oligopsony-dairy-losses-drive-farmers-from-the-fields#When:21:43:00Z Hats off to the herd! Milk production in the UK is expanding yet many dairy farmers have or are likely to leave the industry over the next five years unless raw milk production becomes more economically viable. Can the stakeholders in the sector reach fresh agreement on sustainable contracts for the near 40 million litres of milk produced every day? AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Agriculture, Business Economics, Economies of Scale, Oligopoly, European Economy, EU Farming and Fishing, Government Intervention, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Teaching of Economics, UK Economy, Regional Economics, 2011-07-10T21:43:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-future-of-food-retailing-tesco-in-south-korea http://www.tutor2u.net/blog/index.php/economics/comments/the-future-of-food-retailing-tesco-in-south-korea#When:19:09:00Z Here is a fascinating short video on the techniques and tactics adopted by Tesco as they sought to become South Korea’s number one offline and online food retail store. Business Economics, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Supply, Teaching of Economics, 2011-06-27T19:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-competition-policy http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-competition-policy#When:10:02:00Z 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. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, 2011-05-20T10:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-oligopoly-and-collusion http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-oligopoly-and-collusion#When:07:11:00Z Collusive behaviour is thought to be a common feature of many oligopolistic markets. Collusion is often explained by a desire to achieve joint-profit maximisation within a market or prevent price and revenue instability in an industry. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, 2011-05-20T07:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-oligopoly http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-oligopoly#When:07:08:00Z An oligopoly is a market dominated by a few producers. An oligopoly is an industry where there is a high level of market concentration. Examples of markets that can be described as oligopolies include the markets for petrol in the UK, soft drinks producers and the major high street banks. Another example is the global market for sports footwear – 60% of which is held by Nike and Adidas. However, oligopoly is best defined by the conduct (or behaviour) of firms within a market. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, 2011-05-20T07:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-monopsony-power-in-markets http://www.tutor2u.net/blog/index.php/economics/comments/revision-monopsony-power-in-markets#When:18:06:00Z Monopsony is an important idea in economics but not often discussed in the media – indeed there were only six references to it in the Financial Times between 2003 and 2009! But for economists wanting to understand changes in the balance of power between buyers and sellers in different markets and how this affects prices, profit margins and incentives, it is important to have an understanding of monopsony and its effects. At A2 level you will not be expected to use diagrams to show the impact of monopsony power in product markets. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Oligopoly, 2011-05-19T18:06:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-profit http://www.tutor2u.net/blog/index.php/economics/comments/revision-profit#When:18:00:00Z 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: AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, Price Discrimination, Government Intervention, Regulation, Teaching of Economics, 2011-05-19T18:00:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-market-structure-conduct-performance http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-market-structure-conduct-performance#When:14:54:00Z 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 AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Competitive Markets, Economies of Scale, Monopolistic Competition, Monopoly, Oligopoly, Price Discrimination, Competition Policy, Market Equilibrium and Price, 2011-05-19T14:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/some-light-relief-from-revision-this-weeks-economics-tv http://www.tutor2u.net/blog/index.php/economics/comments/some-light-relief-from-revision-this-weeks-economics-tv#When:19:17:00Z 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. A2 Macro, A2 Micro, AS Macro, AS Micro, Emerging Economies, Development Economics, Business Economics, Economies of Scale, Monopoly, Oligopoly, Cost Benefit Analysis, Economic Growth, Economics of Technology, Government Intervention, Regulation, Market Failure, Externalities, Public Goods, Market Equilibrium and Price, Inter-related Markets, 2011-05-15T19:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-innovation-in-markets http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-innovation-in-markets#When:11:48:00Z This is a revision presentation covering aspects of innovation in markets. A PDF version of the presentation designed as a handout can be downloaded here. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Supply, Teaching of Economics, 2011-05-04T11:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/smartphones-and-creative-destruction http://www.tutor2u.net/blog/index.php/economics/comments/smartphones-and-creative-destruction#When:07:23:00Z Is the multi-function and ubiquitous smartphone one of the best examples of creative destruction. This article “10 Things Killed by the Smartphone” points to a clutch of devices and products whose demand has been affected by the mass volumes of data-heavy smartphones that now dominate the market. MP3 Players Nintendo 3DS and Sony PSP Point-and-Shoot Cameras Personal Video Players Voice Recorders Portable GPS Navigation Devices Personal Digital Assistant (PDA) Wristwatch iPod Nano Paper Maps Telephone Directory Assistance AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Competitive Markets, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, 2011-04-16T07:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/soap-powder-cartel-leaves-stain-on-colluders http://www.tutor2u.net/blog/index.php/economics/comments/soap-powder-cartel-leaves-stain-on-colluders#When:20:30:00Z The EU Competition Commission got into a LATHER about alleged price fixing by a number of multinational soap and washing powder producers and in a ruling today they have imposed fines on Unilever and Procter & Gamble €315.2m ($456m) for fixing washing powder prices in eight countries within the single market. An investigation was prompted by whistle-blowing from Henkel, a German competitor (manufacturer of Persil) and so the investigation CYCLE began. Unilever was fined €104m and Procter & Gamble was fined €211.2m. Henkel was not WHITER THAN WHITE but under EU cartel rules, it avoided a hefty fine because of alerting the authorities to the price fixing scheme. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Oligopoly, Competition Policy, European Economy, Single Market, Market Failure, Teaching of Economics, 2011-04-13T20:30:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/information-empires-and-monopolies http://www.tutor2u.net/blog/index.php/economics/comments/information-empires-and-monopolies#When:16:07:00Z This edited eleven minute video from the RSA explores the rise of information monopolies - from the telephone to films and now the internet. Leading technological historian Timothy Wu exposes the battle for the soul of the internet. he has some pertinent things to say about how the preferences of consumers (a growing desire and willingness to pay for higher quality, filtering, reliability, brand) might actually reinforce the natural tendencies of industries that start out open, flourishing and diversified to consolidate into a controlling monopoly or an oligopoly. Will Google and Apple come to dominate to a much greater degree? For Wu one of the signs to look out for with these types of companies is whether the balance tips between innovation and defensive behaviour.   AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Teaching of Economics, 2011-04-02T16:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-updates-on-competition-issues http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-updates-on-competition-issues#When:09:30:00Z Here are some links to recent news stories on competition and monopoly issues in the UK and the EU Single Market AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, Competition Policy, Government Intervention, 2011-04-02T09:30:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/timetric-internet-browser-market-shares http://www.tutor2u.net/blog/index.php/economics/comments/timetric-internet-browser-market-shares#When:00:02:00Z Timetric update the latest figures for market share in the web browser market - they are shown in the chart below. Internet Explorer continues the long slow slide as rival browsers become more popular and web users reveal their preferences! AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, A2 Micro, AS Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, Digital Learning, 2011-03-12T00:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/information-failures-broadband-market http://www.tutor2u.net/blog/index.php/economics/comments/information-failures-broadband-market#When:12:51:00Z “Confusion is rife and millions of people are not getting what they have been sold” - a damming indictment of the retail broadband market in the UK exposed here by Rory Cellan Jones in a BBC news article and supporting video clip detailing information failures regarding high speed broadband and the dubious ‘up to x mb/s’ adverts that typically only 3% of UK customers experience…a stronger hand from OFCOM is needed to address this information issue. A hat tip to Henry Wingfield for spotting the article. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, A2 Micro, AS Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Market Failure, Information Failure, 2011-03-02T12:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/apply-vertical-integration-and-ipad-pricing http://www.tutor2u.net/blog/index.php/economics/comments/apply-vertical-integration-and-ipad-pricing#When:08:41:00Z A half term hat tip to Henry Wingfield for spotting this super article in Wired magazine. It discusses how Apple is able to keep the iPad at the $500 price point and looks at how the company is vertically integrated and the importance of its retail stores. Have a read here. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Economies of Scale, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2011-02-21T08:41:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/nokia-and-microsoft-form-partnership http://www.tutor2u.net/blog/index.php/economics/comments/nokia-and-microsoft-form-partnership#When:20:16:00Z Microsoft Nokia Partnership, Market Structures, Collaboration, Oligopoly, Joint VenturesIt would seem that the only way two major business are able to compete in the competitive mobile phone market is by joining forces. Microsoft and Nokia are set to pool technology and assets in the hope of creating a worthwhile impact on the smart-phone market. Will they succeed? How can this story be used in the classroom? Business Economics, Competitive Markets, Economies of Scale, Oligopoly, 2011-02-12T20:16:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/wto-finds-boeing-guilty-of-using-illegal-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/wto-finds-boeing-guilty-of-using-illegal-subsidies#When:08:23:00Z This is one of the longest running disputes in trade history. Europe and the US have been fighting for more than six years over each other’s subsidies for large passenger aircraft in the duopolistic battle between Boeing and Airbus. Now the World Trade Organisation has found that Boeing received at least $5bn (£3.1bn) in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Airbus has als been found to be in breach of receiving illegal state aid. Reuters provides useful background here. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Business Economics, Oligopoly, European Economy, Single Market, Global Economy, Government Intervention, Subsidies, OECD Economies, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, Transport Economics, 2011-02-01T08:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/firefox-overtakes-ie-in-the-eu-browser-market http://www.tutor2u.net/blog/index.php/economics/comments/firefox-overtakes-ie-in-the-eu-browser-market#When:09:23:00Z The Telegraph reports here that Mozilla’s Firefox has overtaken Internet Explorer as the preferred browser for internet users in Europe. And Google’s Chrome is fast gaining a strong foothold in this intensely competitive market. The market share data suggests an oligopoly but we know that despite the dominance of a small number of web browsers, the reality is that competition is fierce and millions of web users have their own quite strong preferences! Source: StatCounter Global Stats - Browser Market Share Lots to think about here in terms of economic efficiency - not least dynamic efficiency and innovation in the market. And also the impact of competition policy in action .... as the article says at the end “Since early 2010, Microsoft has offered millions of European customers that use its Windows software the option of using 12 different internet browsers. This followed an agreement in December 2009, when European Union regulators accepted Microsoft’s pledge to give consumers better access to rival browsers, ending a long antit-trust dispute.” A hat tip to Ian Goff for spotting the article. If you want to keep an eye on what is happening to market share on a daily basis this is the link to the StatCounter site   AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, European Economy, Single Market, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, 2011-01-05T09:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/legal-cooperation-between-businesses http://www.tutor2u.net/blog/index.php/economics/comments/legal-cooperation-between-businesses#When:19:10:00Z Not all instances of collusive behaviour are deemed to be illegal by the European Union Competition Authorities. Practices are not prohibited if the respective agreements “contribute to improving the production or distribution of goods or to promoting technical progress in a market.” • Development of improved industry standards of production and safety which benefit the consumer • Information sharing designed to give better information to consumers • Research joint-ventures and know-how agreements which seek to promote innovative and inventive behaviour in a market. The EU has introduced a “R&D Block Exemption Regulation” for this In December 2010 the EU Competition Commission introduced new guidelines on the types of ‘horizontal cooperation’ that is allowed under EU laws. And here is a good recent example - the development of and agreement on joint industry standards in Europe for mobile phone chargers which means that mobile and smartphone users will soon be able to use a standardised charger. The common charger will make life easier for consumers, reduce waste (good for the environment) and benefit businesses who dont have to spend as much on developing their own charger technologies. Apple, Emblaze Mobile, Huawei Technologies, LGE, Motorola, NEC, Nokia, Qualcomm, RIM, Samsung, Sony Ericsson, TCT Mobile (Alcatel), and Texas Instruments have all signed up to the agreement.   AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, A2 Micro, AS Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, European Economy, Single Market, Market Equilibrium and Price, Nature of Supply, Teaching of Economics, 2010-12-30T19:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/orange-ipads-and-the-lock-in-effect http://www.tutor2u.net/blog/index.php/economics/comments/orange-ipads-and-the-lock-in-effect#When:18:10:00Z A really good example of pricing and contract lock-ins here from the BBC’s Rory Cellan Jones who tweeted this afternoon that Orange sells iPads at £199. Then £27 per month for 2 years . So total cost=£847. Compared with £769 for full-price ipad +£10per month pay as you go. A super pricing example to use when looking at oligopolistic markets AS and A2 Specifications, AQA Economics Unit 3, Business Economics, Oligopoly, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, 2010-11-29T18:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/energy-oligopoly-price-investigation-is-launched http://www.tutor2u.net/blog/index.php/economics/comments/energy-oligopoly-price-investigation-is-launched#When:20:54:00Z The industry regulator Ofgem has announced a fresh investigation into the pricing policies of the oligopolistic electricity and gas market - for consumer lobbying groups the wait has been too long but many analysts point to data that shows that many gas supply businesses for example have been operating at a loss for much of the last decade. And that net profit margins are pretty thin compared to the total fuel bill for household customers. More details here Everyone gets hot under the collar about energy prices but the reality is that gas and electricity is no longer cheap and too little progress has been made in ways to reduce our energy consumption. AS and A2 Specifications, AQA Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Oil and Gas, Teaching of Economics, 2010-11-26T20:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/using-google-docs-a2-applied-micro-on-collusion http://www.tutor2u.net/blog/index.php/economics/comments/using-google-docs-a2-applied-micro-on-collusion#When:20:59:01Z One of my Year 13 groups was this week assigned a Google Doc exercise on the economics of collusion within an oligopoly. And their draft findings can be found in a pdf document at the bottom of this blog. One of the benefits of Google docs is that these documents remain live within the group so that students can return to them as and when they need to - perhaps as part of revision. I want to develop their confidence in rearranging text and including supporting links and other documents in their work - editing the work of others is not something that comes naturally to a sixth form student but with plenty of practice and done in the right spirit it can bring about super results and a useful working resource for the whole group. AS and A2 Specifications, AQA Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Teaching of Economics, Digital Learning, 2010-11-21T20:59:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/yet-another-airline-cartel-story http://www.tutor2u.net/blog/index.php/economics/comments/yet-another-airline-cartel-story#When:21:38:00Z Just in case you wanted one more example of price fixing, cartels, collusion and whistle blowing, here it is. The EU has boosted its revenue for the year by fining 11 airlines almost 800m euros for fixing cargo prices between 1999 and 2006. AirFrance-KLM are hit the hardest, at 340m, followed by BA at 104m - but Lufthansa, who blew the whistle on the other airlines involved, are not fined at all. AS and A2 Specifications, AQA Economics Unit 3, A2 Micro, Behavioural Economics, Game Theory, Business Economics, Oligopoly, Competition Policy, European Economy, Government Intervention, Regulation, Transport Economics, 2010-11-09T21:38:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/100-topical-examples-of-business-innovation http://www.tutor2u.net/blog/index.php/economics/comments/100-topical-examples-of-business-innovation#When:07:21:01Z Cross posting from the Business Studies Blog If you ever need to point students to some real-life examples of technological innovation in action, use this new list produced by the Guardian.  Some great case studies here of how technology can be used to identify new value-added services for consumers & businesses, as well as challenge the existing business models of market leaders.  The underlying theme seems to be that technology is enabling these businesses to overcome barriers to entry in a market and quickly become quite disruptive to the established operators.  Not all of these businesses will survive and thrive, but some (e.g. Spotify) are already household names and others may soon achieve that status. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, Economic Growth, Economics of Technology, Teaching of Economics, 2010-09-14T07:21:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/samsungs-galaxy-tab http://www.tutor2u.net/blog/index.php/economics/comments/samsungs-galaxy-tab#When:08:07:00Z Joseph Schumpeter would be proud. The creative side of his destruction is still going strong - Samsung have released a “tab” to rival Apple’s iPad - but is it any good or is it just wasteful expenditure recreating the same? On “paper” it seems better with more capabilities than the iPad… but brand loyalty can be a big attractor… See the video clip comparison here. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, Economic Growth, Economics of Technology, GCSE Economics, Market Equilibrium and Price, Price Mechanism in Action, Teaching of Economics, 2010-09-03T08:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/ec-on-ibm http://www.tutor2u.net/blog/index.php/economics/comments/ec-on-ibm#When:23:03:00Z The European Commission has launched two competition inquiries to study whether IBM has abused its dominant position in mainframe computers. The study will examine whether IBM has put obstacles in place that prevent competitors from operating freely. The other inquiry, launched by the Commission itself, will look at IBM’s relations with maintenance suppliers. AS and A2 Specifications, EdExcel Economics Unit 3, A2 Micro, Business Economics, Competitive Markets, Oligopoly, Competition Policy, 2010-08-02T23:03:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/contestability-of-banking-sector http://www.tutor2u.net/blog/index.php/economics/comments/contestability-of-banking-sector#When:09:48:00Z A good case study for when discussing contestability: Britain’s first new High Street retail bank in more than 100 years opened for business today - Metro Bank. The company’s launch was accompanied with an array of gimmicks to attract maximum publicity, such as the offer of biscuits for customers’ dogs and free breakfasts for clients. Their “USP” includes: promises to open seven days a week and provide credit and debit cards within 15 minutes of application, and customer service and quirkiness to differentiate themselves. AS and A2 Specifications, EdExcel Economics Unit 3, A2 Micro, Business Economics, Competitive Markets, Oligopoly, 2010-07-29T09:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/schumpeter-would-be-proud http://www.tutor2u.net/blog/index.php/economics/comments/schumpeter-would-be-proud#When:09:18:00Z Yesterday, it was announced that valued by market capitalisation, Apple has now surpassed Microsoft to become the biggest tech company in the world with a value of $222 bn. Schumpeter would be pleased to know his creative destruction is still in full flow!  This video would make a good starter for revising growth of firms. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Monopoly, Oligopoly, Economic Growth, Economics of Technology, Teaching of Economics, 2010-05-28T09:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-efficiency-and-price-intervention-in-markets http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-efficiency-and-price-intervention-in-markets#When:19:04:00Z In 2007 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) AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Monopoly, Oligopoly, Price Discrimination, Competition Policy, European Economy, Single Market, Government Intervention, Government Failure, Maximum Prices, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, 2010-05-21T19:04:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-interdependent-behaviour-in-oligopoly http://www.tutor2u.net/blog/index.php/economics/comments/a2-economics-revision-interdependent-behaviour-in-oligopoly#When:07:59:00Z Here is a suggested answer to the question: “Explain how interdependence and uncertainty affect the behaviour of firms in oligopolistic markets” (15 marks) AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Oligopoly, Market Failure, 2010-05-03T07:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/record-fines-for-tobacco-price-fixing-as-cartel-goes-up-in-smoke http://www.tutor2u.net/blog/index.php/economics/comments/record-fines-for-tobacco-price-fixing-as-cartel-goes-up-in-smoke#When:17:09:00Z Today the Office of Fair Trading (OFT) has given out the largest ever total fine in a case under the UK Competition Act 1998. A huge fine has been imposed on two two tobacco manufacturers and ten retailers engaged in illegal price fixing for tobacco products in the UK.This is a good example of the financial risks that companies face when found guilty of anti-competitive behaviour. The tobacco manufacturers involved are Imperial Tobacco and Gallaher, and the retailers are Asda, The Co-operative Group, First Quench, Morrisons, One Stop Stores (formerly T&S Stores), Safeway, Sainsbury’s, Shell, Somerfield and TM Retail. Imperial Tobacco was fined £112m and Co-op and Asda were penalised by £14m each AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, OCR AS Economics Unit F581, A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, Competition Policy, Government Intervention, Regulation, Market Failure, Teaching of Economics, 2010-04-16T17:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/orange-tries-to-make-the-broadband-market-more-contestable http://www.tutor2u.net/blog/index.php/economics/comments/orange-tries-to-make-the-broadband-market-more-contestable#When:16:52:00Z Less than two months since its merger with Deutsche Telekom’s T-Mobile, Orange has made a strategic decision to allow BT to take over Orange’s fixed-line infrastructure and integrate it into it’s own network. Orange’s present broadband network reaches about 65 per cent of the population and the decision to use BT’s network is designed as a way to challenge the dominant providers in broadband in the UK. The industry is an oligopoly with the leading three firms taking over seventy per cent of the market according to the latest data. Market share in UK broadband BT Retail 27% Talk Talk 23% Virgin Media 22% Sky 13% Orange 5% O2 3% Others 7% Orange has invested hundreds of millions in building up a broadband network and installing equipment in local exchanges but they have opted to outsource the network provision to BT and focus instead on selling broadband services. Orange has nearly 30 million mobile phone customers in the UK after joining forces with T-Mobile, but has slipped behind in broadband with around 840,000 customers. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Competitive Markets, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Supply, Teaching of Economics, 2010-04-16T16:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/ofcom-bares-its-teeth http://www.tutor2u.net/blog/index.php/economics/comments/ofcom-bares-its-teeth#When:07:58:00Z The telecoms regulator OFCOM has had a busy pre-Easter week with two notable competition policy decisions that will impact directly on consumers 1/ Ofcom orders BSkyB to make a 23.4% cut in the (wholesale) price of Sky Sports 1 and 2 to rivals such as Virgin Media and BT. Little surprise that Sky has responded that it will challenge the ruling. 2/ Ofcom orders mobile phone companies to cut the cost of termination charges - levied when people phone different networks from 4.5p to 0.5p by 2015. Mobile termination rates are the wholesale charges that operators make to connect calls to each others’ networks. These are two excellent examples to use in any essay on price capping in markets where there is monopolistic power. But will consumers reap the benefits in the long term? Or is the cap on Sky’s prices for live sport and movies merely a hidden subsidy for couch potatoes? A2 Micro, Business Economics, Competitive Markets, Oligopoly, Competition Policy, Government Intervention, Regulation, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, 2010-04-01T07:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/mobile-roaming-charges-and-information-failure http://www.tutor2u.net/blog/index.php/economics/comments/mobile-roaming-charges-and-information-failure#When:17:07:01Z From July 2010 the EU is introducing price caps on the roaming charges facing users of mobile / smart phones but beyond the boundaries of the EU in countries such as Turkey, New Zealand and the United States there are dangers that smart phone users might face horrendously expensive bills - a 10 minute video downloaded with five music tracks could cost £200! A simple email with an attachment could cost £8. Is there any way that price caps could be extended? Or are users simply suffering from information failure by not understanding how to disable the roaming facility? This BBC video provides a timely reminder of the risks. A2 Micro, AS Micro, Business Economics, Oligopoly, Government Intervention, Maximum Prices, Market Failure, Information Failure, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, 2010-03-22T17:07:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/oligopolies http://www.tutor2u.net/blog/index.php/economics/comments/oligopolies#When:13:25:01Z A good applied example here of the strategic interdependence and non-price competition that occurs in oligopolistic markets. This example focuses on the games console market, where in response to the Nintendo Wii’s motion-sensor controllers, Sony have unveiled their own one; whilst Microsoft is joining the party later this year to go even further with a full body motion controller(!). Its a good example of how oligopolistic industries interdependence (follower-leader relationship) can be of benefit to consumers via dynamic efficiency aims. A2 Micro, Behavioural Economics, Game Theory, Business Economics, Competitive Markets, Oligopoly, 2010-03-11T13:25:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/apple-and-patent-races http://www.tutor2u.net/blog/index.php/economics/comments/apple-and-patent-races#When:23:58:00Z 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. A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, Economic Growth, Economics of Technology, Teaching of Economics, 2010-03-08T23:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/coke-follows-pepsis-lead http://www.tutor2u.net/blog/index.php/economics/comments/coke-follows-pepsis-lead#When:17:58:00Z Last year, Pepsi acquired its bottlers in a (backward) vertical integration step. Today Coca-Cola announced it was following their lead, by doing the same with its North American and Scandinavian bottling businesses. They believe the $12.6 bn (non-cash) deal will reorganise its manufacturing and distribution operations, delivering $350m in synergies over four years. A2 Micro, Business Economics, Competitive Markets, Management Issues, Oligopoly, 2010-02-25T17:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/google-is-the-new-microsoft http://www.tutor2u.net/blog/index.php/economics/comments/google-is-the-new-microsoft#When:17:41:00Z 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. A2 Micro, AS Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, Price Discrimination, Competition Policy, 2010-02-25T17:41:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/oft-on-orange-t-mobile http://www.tutor2u.net/blog/index.php/economics/comments/oft-on-orange-t-mobile#When:12:06:00Z 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.,” A2 Micro, Business Economics, Competitive Markets, Economies of Scale, Management Issues, Monopoly, Oligopoly, Competition Policy, 2010-02-03T12:06:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/apples-revenues http://www.tutor2u.net/blog/index.php/economics/comments/apples-revenues#When:06:44:00Z A stunning and clear illustration here of the surge in Apple revenues and the component parts. An entire ico-system has developed around the Apple suite of products. In the final quarter of 2009: Revenues $15.7Bn Profit $3.3Bn 3m Macs sold 9m iPhones 21m iPods And now the iPad .... kindling for the Kindle. A2 Micro, AS Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2010-01-28T06:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/choco-oligopoly http://www.tutor2u.net/blog/index.php/economics/comments/choco-oligopoly#When:19:55:00Z A terrific interactive diagram from the Guardian showing the market shares in the world confectionery market. A2 Micro, AS Micro, Business Economics, Oligopoly, Teaching of Economics, 2010-01-20T19:55:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tv-price-war-begins http://www.tutor2u.net/blog/index.php/economics/comments/tv-price-war-begins#When:19:55:00Z The Telegraph reports on the news that the cost of watching live football and cricket is to be slashed in a price war. A2 Micro, Business Economics, Competitive Markets, Oligopoly, 2010-01-17T19:55:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/intel-sued-by-ftc http://www.tutor2u.net/blog/index.php/economics/comments/intel-sued-by-ftc#When:14:25:00Z 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. AS Micro, Business Economics, Competitive Markets, Management Issues, Monopoly, Oligopoly, Competition Policy, 2010-01-10T14:25:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/google-turns-to-mobile-phones http://www.tutor2u.net/blog/index.php/economics/comments/google-turns-to-mobile-phones#When:14:09:01Z Following on from Geoff’s entry last week on the Nexus One, Google’s foray into the mobile business is due to a desire to dominate the market for Internet searches, just like it does on laptops and desktop computers. But as this article discusses here, it is not clear whether Google’s strategic decision is a sure-fire winner. A2 Micro, Business Economics, Competitive Markets, Economies of Scale, Management Issues, Oligopoly, Market Failure, Information Failure, 2010-01-10T14:09:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/contestable-markets-google-launches-the-nexus-one http://www.tutor2u.net/blog/index.php/economics/comments/contestable-markets-google-launches-the-nexus-one#When:09:42:00Z Google has launched the Nexus One a “super phone” designed to challenge the established dominance of smartphones such as the iPhone, Blackberry and Palm Pre. For £330 buyers anxious to own a Nexus One without locking themselves into a lengthy contract with one of the major mobile phone operators can have a phone delivered that can run on any network.  A2 Micro, AS Micro, Business Economics, Economies of Scale, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2010-01-06T09:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tories-plan-break-up-of-energy-oligopoly http://www.tutor2u.net/blog/index.php/economics/comments/tories-plan-break-up-of-energy-oligopoly#When:13:06:00Z We have been studying oligopoly in our A2 micro and the issue of electricity and gas prices has been headline news for some time. Last week the Conservatives announced plans to break up the highly concentrated domestic energy supply market and inject fresh competition. This is reported here in the Guardian. There is a super paragraph that explains the oligopolistic nature of the industry: “The industry has since consolidated into EDF, E.ON, RWE npower, Centrica, Scottish Power (owned by Iberdrola) and Scottish and Southern Energy, which control the production and supply of electricity and gas to almost all UK households and businesses. Only a handful of small independent power plant operators and tiny suppliers survive. Energy analysts say the market dominance by the Big Six makes it impossible for anyone else to gain a foothold.” Market dominance is reinforced by the highly vertically integrated nature of these energy giants. “they own power plants and source the gas themselves to supply their own customers. This means they will always be profitable at a group level because their retail businesses subsidise their power plant arms when generating costs are high and vice-versa” The energy companies have been accused of engaging in implicit price collusion - tor the main product they most actively sell - direct debit for dual fuel, gas and electricity - the price difference between the cheapest and most expensive is £30 a year or around 60 pence per week. The consumer watchdog EnergyWatch has complained that British consumers are being ripped off by a “comfortable oligopoly” of bloated electricity and gas supply companies.     Business Economics, Oligopoly, Market Failure, Oil and Gas, Teaching of Economics, 2009-12-04T13:06:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/glaxosmithkline-and-pfizer-choose-to-collaborate-on-hiv-drugs http://www.tutor2u.net/blog/index.php/economics/comments/glaxosmithkline-and-pfizer-choose-to-collaborate-on-hiv-drugs#When:21:34:00Z Here is an excellent highly relevant article on cooperative behaviour between oligopolistic giants. Two of the world’s biggest drugs companies GlaxoSmithKline and Pfizer have announced a plan to merge their HIV treatments in a joint venture. ViiV Healthcare is an attempt for both companies to limit the risks of costly races to find new profitable treatments for HIV/aids and give them an opportunity to counter the loss of the revenues as these companies lose patent protection and are open to competition from generic drug makers. It is a strong reminder of the very high fixed costs of research into new drugs; the long lead times between new drug development, testing and finally getting it to the market. And also the impact of the entry of generic drugs into markets once patent protection runs out. The new company has a 19% share of the global drugs market, in comparison to the Californian company Gilead’s 31%. Drug firms’ collaboration pools HIV treatments (Independent) IPO of HIV business is ‘up to shareholders’ (Telegraph) A2 Micro, Business Economics, Oligopoly, Teaching of Economics, 2009-11-03T21:34:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/rbs-lloyds-sell-off http://www.tutor2u.net/blog/index.php/economics/comments/rbs-lloyds-sell-off#When:18:51:00Z The UK market has fewer bank brands than most other countries and choice has fallen in recent years after the Spanish bank, Santander bought up Abbey, Alliance & Leicester and Bradford & Bingley, and Lloyds has taken over all of HBOS’s brands. However, as per a ruling from the European Commission, RBS will sell 318 branches while Lloyds will dispose of more than 600 branches over the next four years. A2 Micro, Business Economics, Competitive Markets, Oligopoly, Government Intervention, Regulation, 2009-11-03T18:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/walmart-and-amazon-price-war-hyper-efficiency-and-the-consumer http://www.tutor2u.net/blog/index.php/economics/comments/walmart-and-amazon-price-war-hyper-efficiency-and-the-consumer#When:11:15:00Z A well publicised price war has broken out in the United States between Walmart and Amazon. Wal-Mart’s $10 promotion applies to the top 10 books coming out in November but the company is also selling 200 best-sellers for 50% of their list price. In a move that has sent shock-waves through the book industry, Wal-Mart has announced it will be selling 10 forthcoming books for just $10 each including Sarah Palin’s autobiography. As is often the case when an aggressive price war breaks out in an oligopolistic market, online bookseller Amazon matched the price cut within hours causing Wal-Mart to cut again to $9. Amazon returned the favour and Walmart has sinced shaved one cent to $8.99! The FT reports that Walmart’s website, the second busiest in the US after Amazon, has also cut prices by 50 per cent on 200 best-sellers. The battle comes at a time when both Walmart and Amazon are under pressure from Google who are rolling out an online site capable of delivering e-books to any device with a Web browser, with an initial library of about half a million titles. How long the price war will last is open to question. The October-December season is a hugely important time for all booksellers - the festive period is the peak time for sales and the intense battle for market share comes at a time of great change in the industry - not least the rapid growth of e-readers and online libraries. Some book publishers fear a price anchoring effect on their industry - namely that Walmart slashing prices and rivals following suit will lead book-buyers to expect new titles to cost $10, a low prices that would force the publishing industry to re-scale its entire business, including the advances paid to writers and ultimately affect the range of titles on offer. For the giants of the book retailing industry, the economies of scale and drive for hyper efficiency in getting products to the market are simply a way of reinforcing their market dominance. But what about the impact on smaller independent booksellers most of whom can never hope to compete on price but who provide light and shade in the book selling industry. It is a reminder that there are different types of efficiency. Allocative, productive, dynamic and social. The latter two may be damaged if the price war escalates and many smaller booksellers go under. This BBC world service news interview focuses on some of the cultural issues of the rise of the giant retailers. Chris Doeblin from the independent Book Culture shop in New York City accepts that supermarkets will bring the price of books down - as they have with food prices - but at a (social) cost to many of us. Guardian: US bookshops urge regulator to investigate online price war A2 Micro, AS Micro, Business Economics, Economies of Scale, Oligopoly, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, US Economy, 2009-10-23T11:15:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/kindlenomics http://www.tutor2u.net/blog/index.php/economics/comments/kindlenomics#When:15:29:00Z Amazon has announced that it will start shipping the Kindle e-reader in the next few days. Leander McCormick-Goodhart is doubtful about whether this spells the end of books. The Kindle device is part of an increasingly contestable market space whose size is set to rise sharply in the months and years to come. I have added a few links to Leander’s blog post. According to Chris Nuttall in an FT blog last month “there are now more than 45 e-reader models available worldwide, according to E Ink, the dominant technology provider for their displays.” A2 Micro, AS Micro, Business Economics, Competitive Markets, Economies of Scale, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, 2009-10-11T15:29:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/ticketmaster-live-nation-merger-provisionally-blocked-by-the-cc http://www.tutor2u.net/blog/index.php/economics/comments/ticketmaster-live-nation-merger-provisionally-blocked-by-the-cc#When:08:13:00Z 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). A2 Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, Competition Policy, Government Intervention, Regulation, 2009-10-08T08:13:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/banana-price-war-must-hit-growers http://www.tutor2u.net/blog/index.php/economics/comments/banana-price-war-must-hit-growers#When:20:48:00Z The supermarkets are spinning the latest price war for sales of bananas as a welcome boost to the spending power of hard-pressed consumers. True in the short term - cheaper bananas in my household will simply encourage me to buy more but ultimately throw most of them away. The medium term impact on banana growers is of much greater importance and it is this issue that was addressed in a timely and useful Big Question feature in the Independent yesterday. Here is the link. The Big Question: Why are bananas so cheap, and what does it mean for producers? There is a huge amount of economics in the article not least some evidence on the oligopsonistic power of banana growers and the oligopolistic battle for market share among the major retailers: “Banana production is an operation on a gigantic industrial scale and is dominated by just five huge companies, Chiquita (formerly United Fruit), Dole, Del Monte, Noboa and Fyffes, which control 80 per cent of the global trade between them.” “Asda - which sells two million kilograms of bananas a week - is charging 46p/kg. On August 25, the price was 84p/kg and 99p/kg last Christmas. Tesco and Sainsbury’s had been forced to match Asda’s price while the cost of bananas at Morrisons has fallen to 57p/kg and 59p/kg at Waitrose.” (Daily Mail) More here Daily Mail Press Association         A2 Micro, AS Micro, Business Economics, Oligopoly, Commodities Markets, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Price Volatility, 2009-10-07T20:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/hold-the-phone http://www.tutor2u.net/blog/index.php/economics/comments/hold-the-phone#When:18:45:00Z 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. A2 Micro, Business Economics, Competitive Markets, Oligopoly, Price Discrimination, 2009-09-09T18:45:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/orange-t http://www.tutor2u.net/blog/index.php/economics/comments/orange-t#When:17:37:00Z Is this going to be the new name of the proposed merger between T-Mobile and Orange? A2 Micro, Business Economics, Competitive Markets, Economies of Scale, Management Issues, Oligopoly, 2009-09-08T17:37:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/oracle-sun-merger http://www.tutor2u.net/blog/index.php/economics/comments/oracle-sun-merger#When:16:49:01Z 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. A2 Micro, Business Economics, Competitive Markets, Economies of Scale, Monopoly, Oligopoly, Competition Policy, Economic Growth, Economics of Technology, Government Intervention, 2009-09-03T16:49:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/browser-wars http://www.tutor2u.net/blog/index.php/economics/comments/browser-wars#When:16:09:00Z 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. A2 Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, Competition Policy, Economic Growth, Economics of Technology, Market Equilibrium and Price, Price Mechanism in Action, 2009-09-01T16:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/game-on http://www.tutor2u.net/blog/index.php/economics/comments/game-on#When:11:19:00Z Oligopolistic theory predicts that firms in such a market structure will tend to prefer non-price competition rather than price competition due to the self-defeating outcome of a price-war. A2 Micro, Business Economics, Competitive Markets, Oligopoly, 2009-08-27T11:19:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/smart-phones-smart-money-for-apple-and-rim http://www.tutor2u.net/blog/index.php/economics/comments/smart-phones-smart-money-for-apple-and-rim#When:15:07:00Z Feature rich smart phones such as the iPhone and Research in Motion’s Blackberry account for a disproportionate share of the operating profits of mobile phone manufacturers. According to new research by Deutsche Bank, Apple and Research In Motion were responsible for 3% of all cellphones sold in the world last year but 35% of operating profits. In 2009 the figures are forecast to be 5% of the global market in unit terms but 58% of total operating profits. Together Apple and RIM had about 32% of the smart-phone market. Nokia dominates the basic mobile phone handset market where operating margins are much thinner. The key to understanding the huge profits of smart phone makers is the subsidy offered by the mobile phone network providers who tend to treat mobile handsets as loss-leaders. They are happy to sell a phone for £60 or less because they can recoup the money and more through lucrative monthly call plans where the bulk of users (consumers) are locked in through minimum length of service contracts. Palm Inc is trying to break into the cell-phone market and take some of the supernormal profits available. A2 Micro, AS Micro, Business Economics, Economies of Scale, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Demand, 2009-07-25T15:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-trivia-global-sales-of-mobile-phone-units http://www.tutor2u.net/blog/index.php/economics/comments/economics-trivia-global-sales-of-mobile-phone-units#When:13:41:00Z Global sales of mobile phone handsets set to fall by 10% in 2009 Nokia is the dominant manufacturer with 38.5% of the market in 2008 Average selling prices of their handsets have fallen from Euro 74 to Euro 62, operating margins are close to 10% 245 million mobile phone handsets were shipped in the first three months of 2009 Source: The Times (17-07-09) A2 Micro, AS Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, Global Economy, Quirky Trivia, 2009-07-22T13:41:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/lcd-manufacturers-are-screened-for-price-fixing http://www.tutor2u.net/blog/index.php/economics/comments/lcd-manufacturers-are-screened-for-price-fixing#When:07:49:00Z Here is an example of alleged price fixing that directly affects the prices that consumers pay in the market for their durables. The European Union competition commission are alleging that manufacturers of LCD screens have been engaged in a price fixing cartel in a market thought to be worth an estimated £43bn a year. The industry is dominated by LG Display and Samsung, which together have about half the market for television and computer monitors. Phillips, Sharp and Hitachi are also heavily involved in the market along with Chi Mei from Taiwan. LCD panels are used in televisions, computer monitors and a range of smaller electronic gadgets including mobile phones and digital music players. The investigation into price fixing has crossed several countries including US, Japan, South Korea and Europe. In theory, fines for breaches of anti-trust laws can be as much as 10 per cent of annual turn-over. A2 Micro, AS Micro, Business Economics, Oligopoly, Competition Policy, European Economy, Government Intervention, Regulation, Market Equilibrium and Price, Nature of Demand, 2009-07-14T07:49:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/petrol-price-war-breaks-out http://www.tutor2u.net/blog/index.php/economics/comments/petrol-price-war-breaks-out#When:23:10:00Z Here is an example of the kind of periodic price war that is characteristic of an oligopolistic market. The Guardian reports that the supermarket chain Asda has cut the cost of unleaded petrol and diesel to 99.9p a litre at all its 176 fuel stations. .Sainsbury’s, Morrisons and Tesco are the other main players in the market, and the Automobile Association believes that they will follow Asda’s lead. Is Asda really the price leader in the UK petrol retail market - Morrisons has already followed suit by dropping prices to what is considered to be the psychologically important price of 99.9p per litre or less. Most supermarkets engage in price-matching in local areas so if a rival’s prices are going down, then they will go down as well - to some economists this is a form of hidden price fixing. Or is this move part of a wider phase of price competition across the supermarket chains, using ultra-low profit margins on fuel to entice customers into their stores? The report says that the number of petrol stations in the UK has fallen to about 9,000, from a peak of 30,000 three decades ago and that smaller independent petrol stations would struggle to match the firepower of the big supermarkets. A 2p drop in the price of petrol saves the average UK family £4.34. The average charge per litre for unleaded has been 103.8p, ranging between 99.9p and 115.9p.The average for diesel was 105.3p, ranging between 99.9p and 117.0p. A2 Micro, AS Micro, Business Economics, Oligopoly, Market Equilibrium and Price, Nature of Demand, Nature of Supply, 2009-07-09T23:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/windows-for-a-new-generation http://www.tutor2u.net/blog/index.php/economics/comments/windows-for-a-new-generation#When:08:41:00Z It seems that Joseph Schumpeter’s process of creative destruction is still going full throttle ahead, with Google’s announcement this week of a operating system (Chrome OS) to rival Microsoft’s dominance through Windows. A2 Micro, Business Economics, Competitive Markets, Economies of Scale, Oligopoly, Economic Growth, Economics of Technology, 2009-07-09T08:41:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unintended-consequences-of-painkiller-innovation http://www.tutor2u.net/blog/index.php/economics/comments/unintended-consequences-of-painkiller-innovation#When:18:18:00Z 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. A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, Market Failure, Information Failure, Market Equilibrium and Price, Nature of Demand, 2009-07-07T18:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/will-o2s-network-be-able-to-carry-the-traffic http://www.tutor2u.net/blog/index.php/economics/comments/will-o2s-network-be-able-to-carry-the-traffic#When:15:25:00Z 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. A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, Economic Growth, Economics of Technology, Market Equilibrium and Price, Elasticity of Supply, Nature of Demand, 2009-07-07T15:25:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/rogue-oil-traders http://www.tutor2u.net/blog/index.php/economics/comments/rogue-oil-traders#When:12:16:00Z It is generally assumed that the oil market is an oligopolistic market with output dominated by a few large players; whilst the consumers in the market are price-takers, given the significant number of consumers that exist.  However, (allegedly) it seems that a trader at PMV Oil Futures has managed to move the market all by himself. A2 Micro, AS Micro, Business Economics, Competitive Markets, Oligopoly, Commodities Markets, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, 2009-07-05T12:16:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/et-phone-home http://www.tutor2u.net/blog/index.php/economics/comments/et-phone-home#When:08:02:00Z The role of competition commissions around the world is to protect the public interest, particularly against firms abusing their dominant positions.  In this light, another victory has been struck by the EU Competition Commission today as an earlier judgement comes finally into force as the cost of sending text messages when abroad has been capped.  We’ve also seen a fall in the maximum charge for receiving and making a phone call, whilst abroad. A2 Micro, Business Economics, Competitive Markets, Oligopoly, 2009-07-01T08:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/who-will-gain-if-five-becomes-four http://www.tutor2u.net/blog/index.php/economics/comments/who-will-gain-if-five-becomes-four#When:15:40:00Z The press is full of coverage about a possible takeover bid by Vodafone for T-Mobile UK which is currently owned by Deutsche Telekom. Nothing is certain yet - but if a takeover goes ahead and is allowed by the competition authorities, Vodafone will have around 40 per cent of the market for mobile phone users in the UK. The approximate market shares would look something like this: Vodafone 40% O2 (owned by Spain’s Telefónica) 27% Orange (owned by France Telecom) 22% 3 (owned by Hutchison Whampoa) 8% If Vodafone and T-Mobile become one business there is one obvious cost saving (or synergy) - namely that the merged business would have to run only one mobile network instead of two, for example, so Vodafone could aim to secure significant savings in capital and operating spending. For any would-be purchaser the risk is over-paying for a business, there are plenty of examples of the ‘winners’ curse’ in past takeover bids. The mobile phone market is a classic case of an oligopoly with just a handful of corporations dominating the market - but you do not always need a large number of operators to create genuine price and non-price competition in the industry. Indeed the UK is the only major European market with five mobile operators, and some analysts claim that the fierce battle for market share has had the effect of cutting profit margins and reducing the profits needed to reinvest in rolling out the next generation of mobile phone technology and improving the speed and reliability of a mobile phone network that needs to cope with an ever-increasing number of data-rich applications. Having four rather than five major players looks on the surface to be reducing competition, but perhaps all of the remaining businesses will gain from higher profits at a time when the recession has hit the demand for new handsets and mobile phone services. Vodafone is a giant in the industry reporting revenues of £41bn for the year to March 31, 2009 and an operating profit of £11.8bn. In the mobile phone service provider market there is always a balance to be struck between economic efficiency and welfare. Competition keeps prices down for consumers and helps to make fast mobile connections more affordable to millions. But the businesses themselves must be able to finance investment on enormous networks and generate a sufficient rate of return for their shareholders. It will be interesting to see how the competition authorities respond to the next wave of consolidation in the industry. A2 Micro, AS Micro, Business Economics, Economies of Scale, Oligopoly, Competition Policy, Economic Growth, Economics of Technology, Market Equilibrium and Price, Nature of Supply, Price Mechanism in Action, 2009-06-29T15:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/ofcom-on-sky http://www.tutor2u.net/blog/index.php/economics/comments/ofcom-on-sky#When:12:12:00Z The distribution row between Sky and Virgin last year emphasised the competition issues in the UK Pay TV market. Thus it is interesting to note today’s proposal by Ofcom that rival broadcasters should be allowed access to Sky content at regulated prices. A2 Micro, Business Economics, Competitive Markets, Monopoly, Oligopoly, 2009-06-26T12:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/server-demand-dips-as-downturn-bytes http://www.tutor2u.net/blog/index.php/economics/comments/server-demand-dips-as-downturn-bytes#When:07:56:00Z The seasonal surge in user demand for the Tutor2u blog and other online resources last year caused our rather ancient server to crash leaving the website lying low for a while. So this year we are watching the performance of our new upgraded server with added interest. Elsewhere the recession has caused steep cutbacks in IT investment as businesses scale down their spending on upgrading systems or postpone them until conditions improve. A2 Micro, AS Micro, Business Economics, Oligopoly, Market Equilibrium and Price, Nature of Demand, Recession Watch, 2009-06-01T07:56:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-market-structure-and-innovation http://www.tutor2u.net/blog/index.php/economics/comments/revision-market-structure-and-innovation#When:13:16:01Z Which market conditions are optimal for effective and sustained innovation to occur? This is a question that has vexed economists and business academics for many years. High levels of research and development spending are frequently observed in oligopolistic markets, although this does not always translate itself into a fast pace of innovation. A2 Micro, Business Economics, Monopoly, Oligopoly, 2009-05-28T13:16:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-market-structure-conduct-and-performance http://www.tutor2u.net/blog/index.php/economics/comments/revision-market-structure-conduct-and-performance#When:08:12:00Z A revision PowerPoint presentation on structure, conduct and performance in markets - designed for A2 micro Presentation Market_Structure_Revision.ppt A2 Micro, Business Economics, Competitive Markets, Monopolistic Competition, Monopoly, Oligopoly, 2009-05-22T08:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/hmv-diversifies-into-cinemas http://www.tutor2u.net/blog/index.php/economics/comments/hmv-diversifies-into-cinemas#When:11:11:00Z Here is a great example of business diversification and growth through joint venture.  HMV is entering into a joint venture with cinema chain Curzon Artificial Eye to open a cinema called hmvcurzon above its Wimbledon store. A2 Micro, AS Micro, Business Economics, Competitive Markets, Oligopoly, GCSE Economics, 2009-04-28T11:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/thomson-reuters-and-bloomberg-duopoly http://www.tutor2u.net/blog/index.php/economics/comments/thomson-reuters-and-bloomberg-duopoly#When:08:48:00Z The Lex column in the FT today considers the outlook for the news wire services run by Thomson-Reuters and Bloomberg. I couldn’t function without my EcoWin service - it is invaluable to be able to call up data on virtually anything when teaching in the classroom or when preparing an article or student handout. The market for news wire services is basically an oliogpoly.  And economies of scale really matter in this industry given the dominance of fixed costs in providing real time information services to subscribers. How will Bloomberg and Thomson-Reuters be affected by the downturn in the financial services industry? Bloomberg has reported a fall in the number of Bloomberg terminal subscriptions - they are down by 2.5% from a subscriber base estimated at 300,000. Terminal sales account for about 85 per cent of Bloomberg’s revenues and each can be rented for $1600 a month! In a world of great financial and economic uncertainty and incredibly heavy newsflow one might expect the demand for news wire services to be fairly recession resistant. But the collapse of many hedge funds and steep cutbacks in employment in other areas of financial services is having a negative effect on both news information companies. Is a price war in the cost of renting a terminal imminent? Or will the two giants continue to compete in non-price terms? The latter is more likely - just recently Bloomberg announced it has added Associated Press to its service - offering yet more breaking news for subscribers! A2 Micro, Business Economics, Oligopoly, 2009-04-28T08:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-why-do-cartels-often-collapse http://www.tutor2u.net/blog/index.php/economics/comments/qa-why-do-cartels-often-collapse#When:09:36:00Z Recent business history both here in the UK and in international markets is littered with examples of cartel-behaviour by businesses that seem to have come unstuck. Just type price-fixing into Google news and see what comes up! Even on the day I am writing this blog answer, the FT reports that three cargo airlines have agreed to pay fines totalling $214m for their roles in a global conspiracy to fix prices for air freight. Bloomberg reports that a former sales executive at Hitachi Displays Ltd. has been charged with participating in a global conspiracy to fix prices for liquid crystal displays sold to Dell Inc. And in Ireland, a former director of a Dublin car company has been given a 15-month suspended prison sentence and fined €160,000 after pleading guilty to charges of price-fixing. Economics Q&A, Q&A - Market Failure, Q&A - Markets, A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, Competition Policy, Government Intervention, Market Failure, Market Equilibrium and Price, Price Mechanism in Action, 2009-04-14T09:36:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/bus-oligopoly-under-scrutiny http://www.tutor2u.net/blog/index.php/economics/comments/bus-oligopoly-under-scrutiny#When:10:52:00Z The Office of Fair Trading has announced an investigation into the alleged lack of competition in local bus services. Years after the deregulation of bus services, the market has become concentrated in the hands of just a few main operators. Announcing the launch of a review, the OFT said that “This sector has become increasingly concentrated by takeovers, with nearly two-thirds of services now controlled by five large operators. The study will consider whether concentration in the market has a positive or negative impact on the prices consumers pay and the services they receive, and whether or not there is competition between operators bidding for tendered services.” The five biggest local bus operators are Arriva, First Group, Go Ahead Group, National Express and Stagecoach. Arriva has approximately 20 per cent of the London market under contract to Transport for London. Outside of London Arriva runs more than 5,000 buses and has built up an approximate market share of 15 per cent. Expect a report to emerge in the autumn about the extent to which the competition authorities may have to intervene to provide greater safeguards against the dimunition of competition in local bus markets where often one firm has emerged as a dominant force. Are consumers’ interests best served by unfettered competition between bus service providers on the road? A2 Micro, AS Micro, Business Economics, Oligopoly, GCSE Economics, Government Intervention, Transport Economics, 2009-04-06T10:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/waitrose-provides-a-welcome-break http://www.tutor2u.net/blog/index.php/economics/comments/waitrose-provides-a-welcome-break#When:10:17:00Z What do you use a motorway service area for? A comfort break? Perhaps a chance to check emails or phone ahead to your destination? Perhaps a night’s break before continuing your journey - or maybe a chance to avoid the supermarket queues at home and pick up some groceries on the way home? Waitrose is entering into a franchise agreement with Welcome Break to open up food stores in some of its motorway service stations. It is another sign of how food retailers are looking to extend their reach away from the superstore and also how businesses are responding to our changing needs and wants when we set off on long haul drives on our major roads. A2 Micro, AS Micro, Business Economics, Oligopoly, Market Equilibrium and Price, Transport Economics, 2009-04-03T10:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-in-what-type-of-market-does-the-ipod-operate-in http://www.tutor2u.net/blog/index.php/economics/comments/qa-in-what-type-of-market-does-the-ipod-operate-in#When:15:10:00Z Q&A: iPod and Market Structure: In what type of market does the iPod operate in? In this answer I will assume that we are discussing the market for personal digital audio and video media players. Keep in mind that music can be downloaded (legally and illegally) in numerous ways such as the iPod, smart phones and standard laptops. Economics Q&A, Q&A - Markets, A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, GCSE Economics, Market Equilibrium and Price, Nature of Demand, 2009-02-22T15:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/blade-runner http://www.tutor2u.net/blog/index.php/economics/comments/blade-runner#When:20:34:55Z Changing your razor blade is no soft touch decision. After years of teaching my old three-blader to recognise and traverse the craggy features of my cheeks and jaw (I prefer to shave without a mirror) I took the plunge last week and swapped for one of the new Azor razors from King of Shaves. The Azor is the first British designed, engineered and manufactured razor in over a century and it was launched last June in a bid to win a share of the £315m annual sales of razors in the UK alone in a duopolistic market dominated by Gillette and Wilkinson Sword. A2 Micro, AS Micro, Business Economics, Management Issues, Oligopoly, Market Equilibrium and Price, Nature of Demand, 2009-01-07T20:34:55+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/chasing-the-petrol-pound-the-supermarket-price-war http://www.tutor2u.net/blog/index.php/economics/comments/chasing-the-petrol-pound-the-supermarket-price-war#When:20:13:01Z Under the threat of scrutiny from the Office of Fair Trading and conscious that in a recession, consumers are prepared to travel further in search of value for money - the price war at the pumps between the leading supermarkets shows few signs of ebbing. Asda and WM Morrisons set the latest ball rolling this week and Tesco and Sainsbury have fallen into line in quick order. It is difficult to work out who - if anyone - is assuming the mantle of price leader in this battle for fuel sales. Crude oil prices are back where they were this time last year and fuel prices are pretty close to the levels seen in the Fall of 2007. For all of the talk of petrol and diesel prices taking weeks to change in response to the fluctuating price of crude, this market seems to be adjusting pretty swiftly. This can not be said for electricity and gas prices - Robert Peston picks up on this in his blog today. A2 Micro, AS Micro, Business Economics, Oligopoly, GCSE Economics, Oil and Gas, Market Equilibrium and Price, Price Mechanism in Action, 2008-10-20T20:13:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/eu-goes-bananas-over-price-rigging http://www.tutor2u.net/blog/index.php/economics/comments/eu-goes-bananas-over-price-rigging#When:11:05:00Z It has taken over three years of intensive investigations. But the EU has decided that the time is now ripe to announce heavy fines for a well-known bunch of banana growers guilty of operating a price-fixing cartel in eight European Union countries.  Chiquita Brands and Dole Food were among the producers found guilty of rigging import prices into a market worth around Euro 3 billion annually. Because of their ‘whistle-blowing’ role in outing the cartel, Chiquita have been given immunity from the fines.  In contrast, Dole faces a liability of over Euro 45m for its key role in the price-fixing agreement. Del Monte is also involved and has been fined $19.8 million, but Fyffes was not part of the anti-trust investigation. Tough EU competition laws now allow businesses who suffered commercial damage from the banana price fixing cartel to take legal action against the growers / importers. A2 Micro, AS Micro, Business Economics, Oligopoly, European Economy, Single Market, Government Intervention, Regulation, Market Failure, 2008-10-16T11:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/blackberry-raises-the-bar-again http://www.tutor2u.net/blog/index.php/economics/comments/blackberry-raises-the-bar-again#When:14:53:00Z It is the classic contestable market - BlackBerry is locked into a perpetual battle with the likes of the iPhone for the hearts, minds and wallets of corporate and consumer users. The Indy today reports on the release of the new Blackberry Storm - hang the credit crunch, forget the implosion in the real economy, lets get out there and try it! A2 Micro, Business Economics, Oligopoly, Economic Growth, Economics of Technology, 2008-10-08T14:53:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/nokia-cuts-prices-as-battle-for-market-share-in-handsets-hots-up http://www.tutor2u.net/blog/index.php/economics/comments/nokia-cuts-prices-as-battle-for-market-share-in-handsets-hots-up#When:11:55:00Z Nokia has increased its market share for handsets from 38.4% to 40.9% according to second quarter data from CCS Insight and reported in an article in the Times yesterday. The intense battle for market share is resulting in periodic price wars and the economic downturn seems to have precipitated another one - Nokia is reducing prices by up to 10% . The mobile phone handset industry is best described as an oligopoly. In the second quarter of 2008 the leading five manufacturers accounted for 83% of world sales. Nokia 40.9 Samsung 15.3 Motorola 9.4 LG 9.3 Sony Ericsson 8.2 The global mobile phone market grew by 12.3 per cent year-on-year in the first half of 2008 with shipments reaching 584 million units - the economies of large scale production in this kind of industry must be absolutely enormous. The power of the brand and the impact of achieving lower costs per unit are two of the key competitive drivers that impact on consumer prefereces. The Times article is here A2 Micro, AS Micro, Business Economics, Economies of Scale, Oligopoly, GCSE Economics, Market Equilibrium and Price, Nature of Demand, 2008-08-02T11:55:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/nintendo-poised-to-overtake-sony-in-the-consoles-battle http://www.tutor2u.net/blog/index.php/economics/comments/nintendo-poised-to-overtake-sony-in-the-consoles-battle#When:23:45:00Z Sony has released results showing that it has sold 14.4 million PS3 machines worldwide since it went on sale late 2006 but this might not be enough to prevent Nintendo from overtaking them as the world’s biggest seller of computer games consoles in 2008. This classic oligopolistic market continues to see vigorous price and non-price competition between the three dominant players - Sony, Nintendo and Microsoft. This week - all ten of the top UK selling computer games are either for the Wii or Nintendo DS and five of the chart toppers are produced by Nintendo themselves. The company has sold more than 10 million Wii consoles and 70 million DS handheld machines worldwide. More background available here “Consoles look to hit their stride” A2 Micro, AS Micro, Business Economics, Oligopoly, GCSE Economics, Market Equilibrium and Price, Nature of Demand, 2008-07-29T23:45:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tobacco-price-fixing http://www.tutor2u.net/blog/index.php/economics/comments/tobacco-price-fixing#When:07:00:01Z John Fingleton’s tenure at the competition watchdog the Office of Fair Trading has coincided with some huge fines for price collusion within oligopolistics markets and yesterday came one of the biggest with a tobacco manufacturer and five retailers agreeing to pay the biggest collective penalty yet imposed for price-rigging after admitting their role in efforts to boost the cost of cigarettes.The six companies agreed to pay £132m to settle the charges with Gallaher, one of two tobacco manufacturers involved in the case, shouldering the lion’s share of the burden after agreeing to pay £93m.The Times reports that “The six companies fined made prompt admissions of illicit competition practices in return for lenient fines.” - another example of game theory and the prisoners dilemma in action! Coverage here BBC news: Six firms fined in tobacco probe The Telegraph: OFT’s hefty fines for tobacco price fixing The Times: Supermarkets and tobacco firm are fined £173m for price fixing Office of Fair Trading press release There is a recent profile of John Fingleton here in the Times   A2 Micro, Behavioural Economics, Game Theory, Business Economics, Oligopoly, Competition Policy, Government Intervention, Regulation, 2008-07-12T07:00:01+00:00