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Lecture #7
Joe Lau
Free market
All economic decisions and actions regarding transfer of money, goods, and services are voluntary. Is a free market desirable?
Unrestricted freedom not desirable
Physical harm Price fixing
Hong Kong (1st) Singapore (2nd) Luxembourg (3rd) Estonia (4th) Ireland (5th) New Zealand (5th) United Kingdom (7th) Denmark (8th) Iceland (8th) Australia (10th)
Supermarket duopoly
Market dominance
http://cbdd.wsu.edu/kewlcontent/cdoutput/TR503/page47.htm
Market power
The ability of a firm to independently raise prices above market levels for a non-transitory period without losing sales to such a degree as to make this behavior unprofitable.
Relevant factors
Market Share Barriers to Market Entry Vertical Integration, etc.
Market dominance
An extreme form of market power Unequal bargaining power
Economy
Lack of innovation
Issues
Does HK need a competition law?
General? Food? Fuel?
Further readings
(Ronny Tongs speech in Chinese) http://www.ronnytong.org/public/contents/1836 http://www.economist.com/business/displayStory.cfm?Story_ID=413357&CFID=3131 http://www.hkdf.org/newsarticles.asp?show=newsarticles&newsarticle=13 http://www.webb-site.com/articles/noncompete.htm http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/129871/1/.html
Globalization
International economic integration
Integrated international trade & financial markets
Capital mobility
Who wins?
Large European sugar refiners Frs Beghin, Germany's Sudzucker, Britains Tate & Lyle.
Inconsistent rhetoric
Unfair competition while pushing for open markets and fair trade. Tariffs on imports (Thai frozen prawns) Receive $1 of aid, lose $2 from unfair trade.