RWE MICRO Flashcards
Common pool resources
Brazil and the Amazon:
- Between 2017 and 2018 a record breaking 8000sq kms of the amazon was deforested. This is a 13.7% rise from the previous year.
→ deforesting led to 46% of Brazils greenhouse gases
Tragedy of the commons:
Illegal overfishing:
- Some chinese vessels are illegally fishing in the sea near Sierra Leone. This is costing Sierra leone $50m a year.
Furthermore, the population is starving, with many earning a few dollars a day. The fishing industry represents 12% of the country’s economy and it is the source of 80% of the populations protein consumption.
Market failure:
Asymmetric information
Market for lemons (cars):
- Fifty years ago the used car market was the epicentre of dodgy business dealing. As the sellers knew more than the buyers (adverse selection). Today however, you often need many documents when selling your car. In Belgium you have to put it through a technical inspection, this will result in the creation of a “car pass”, which contains many of the details.
Market failure:
Nudges
Wales and organ donation:
- Starting in 2015 Wales introduced a soft opt-out system. This means that if a person has not registered a decision to become an organ donor OR a decision to NOT become an organ donor, they will be considered as having NO OBJECTION to being an organ donor, and thus gives consent to donating those organs.
- This still leaves the consumer with the choices, but slightly pushes them towards organ donation
Competition policy
Mastercard:
- Prior to 2015, Mastercard had prevented retailers using cheaper banking services outside their home country (they were forced to use the fee set in their home country, even if they were available elsewhere).
- fined 570M by the EU
Market failure: abuse of monopoly power
Apple’s App store:
Apple’s app store is owned and controlled by Apple. Apple can decide which games are published, and furthermore, if the developer decides to charge for the game, Apple takes a 30% cut.
Important upside though, the strict monitoring results in less security issues (few malevolent apps compared to android..)
Oligopoly
Canada and Telecom:
Bell, Rogers, and Telus are the three national telecoms.
Canada has some of the highest wireless prices in the developed world
Across Canada, prices tend to be lower where there is a regional competitor.
Collusion
NHS and the drug firms:
Four pharmaceutical companies have been accused of illegally colluding to restrict the supply of an anti-nausea tablet, and as a result driving up the price paid for it by the NHS by +700%!
Drug is often prescribed to chemo patients
Price increased from 6.5 GBP to over 50 GBP
(this started in 2013!)
Costs of these tablets increased from 2.7m to 7.7m annually (costs to the NHS)
Oligopoly and price fixing
Fender (guitar manufacturer):
Fender engaged in price fixing between 2013 and 2018. They believed this would result in new guitar player retention, keeping them as long term customers.
They have been fined 4.5M GBP
(If Fenders main goal is new player retention.. It should do more to make entry into the hobby as affordable as possible)
Price discrimination
ASDA:
Supermarket giant ASDA will give certain shoppers discounts on their shopping. This occurred following the announcement that the UK was at 9% inflation rate.
Workers in the NHS and Emergency services can all access a 10% discount across ASDAs in the UK when they present their Blue Light Card.
Furthermore, all ASDA employees (also new ones, even on the first day of working!!) will be able to save 10% on their shopping.
Cartel
OPEC:
Oil prices slid from $86 per barrel to $50 in 2019.
Worried by a drop in oil prices and rising supplies, the OPEC has decided to lower output by 800,000 bpd (barrels per day).
→ wants to avoid a surplus
Non-price competition
UK Gym memberships:
Some examples of non-price competition:
Quality and range of equipment
Additional facilities (pool..)
Location
Parking availability
Free-wifi
Access to multiple clubs within a gym chain
Government intervention:
Nationalisation
Northern Rail (UK):
Arriva loses the franchise to run the Northern line, and so this part of the UK rail network will be nationalised
Passenger journeys are rising per year. 2016 - 1.73B
“I’m hoping that running a railway for people rather than purely for profit will nudge Northern back to health.”
Government intervention: preventing mergers
Sainsbury’s and ASDA:
The UK competition regulator has blocked the possible takeover of ASDA by Sainsbury’s.
Sainsbury’s wanted to takeover ASDA for 7bn GBP
The CMA believed that the prices would increase post-merger
Reassured 10s of thousands of ASDA employees, as they had been worried about their future
Suppliers and unions were happy with this decision. It reassured 10s of thousands of ASDA employees, as they had been worried about their future
Indirect tax
Singapore Sugar Tax:
- 18p per litre tax on drinks which have a sugar content of 5-8g per 100ml
- Resulted in +150M GBP in revenue from these taxes since April
–> this money (alongside other funding) is going to health and sport education (in schools)
