Showing posts with label monopolies. Show all posts
Showing posts with label monopolies. Show all posts

Economic Theory No Longer Applies

For the first time economic theory is being challenged by the Internet. Economics has always put forward the premise that the consumer was all-knowing, in that the "going price" for products was known. Of course, in the past this has been a lie. The demand curve was absolutely false. Buyers did not know where they could get the best price.

Now, potential buyers can go to a store, try on a particular brand of clothing to find the correct size, then go and buy it on the Internet. Some shops are charging for such browsing. This will only drive consumers away to another store.

There isn't much doubt that there are too many stores in the market selling the same goods. This is a problem caused by local councils allowing shopping center development even when it is contrary to local planning laws. Councils are too easily influenced by cashed-up big business.

As chain stores move into populated centers of rural areas the future looks bleak for the corner store. The days of local monopolies of one grocery store, one fruit shop, a chemist and a fishmonger are well and truly gone. It is no wonder the majority of small startups fail.

We cannot turn back the clock. The consumer is currently very informed about price if not quality. Economics never did include quality into its theories. It cannot easily be defined.  With oligopolies taking over small rivals economics is no longer relevant. It cannot be applied any more. The idea that prices fall to clear the market of "surplus" products was never real world practice. Shops have always operated on a percentage mark-up.
. . . . . . . . . . . . . . . . . . . . .
Economics
Australian Blog