Saturday, August 13, 2005

New Law, Old Memories

I've done a little unexpected reading into competition law, and the implications are rather interesting. Economics was something I really enjoyed back at the Malaysian A-levels, well, the second year at least. The first year was dominated by a weirdo of a teacher who'd come in and announce that monkeys have escaped from the Botanical Gardens and he was of the opinion that they ended up in his classrooms. Which was perhaps true at least in the instinctive genes in monkeys that make them run away from rabid dogs toothless lions because of the bad reputation they'd get, considering that that particular class with a full enrolment of five students did not once have full attendence.

From this link with other equally cool barnyard animals. And before you mention it - depends on whose barn, eh.

In the second year I scored straight As, which surprised the new - and fabulous - teacher, who had thought that I was an Editorial Board slacker who cared for little outside producing the best magazine ever published, which was actually, ironically, also true, since my results were not purely academicly motivativated, and were instead basically due to me taking out my additional stress in a failed relationship into finding fault with the also ironic concepts of demand, supply, and three-way relationships three-sector economies.

Anyhow, say you have Company V which is the largest local producer of violins, and has a high market share, due to the high costs of imports, what with taxes, duties, currency conversation and transportation costs, not to mention the power of mass-production in lowering individual product cost. Then you have Company C, a cello producer, who owns that particular market share. Company V decides to enter the cello market, but its products don't sell well for various reasons, including, say, lesser experience in cellos, and a higher initial cost of getting new makers and new equipment. So, Company V decides to sell its cellos at below the actual cost of making cellos, even below the cost price of a Company C - making a loss, and selling at a price which would be impossible for anyone to compete with. It uses its violin profits to keep its cello production afloat - well, at least, just long enough to put Company C out of business. Then it buys up Company C's assets, and starts selling cellos at the regular price - or, for the heck of it, even higher, since it now monopolizes the industry.

Another tactic would be to have a tying agreement, basically demanding that the buyers of violins include the purchase of a certain number of cellos (the violin market being stronger), crushing the cello competititors. This, by simply suggesting that if they didn't buy Company V's cellos, they wouldn't be able to buy it's violins come next year, and be forced to import, at a much higher price.

Interesting, isn't it. Of course, that would technically be against the law, and I should note that this is purely theoretical and I haven't seen it in the music industry, though with music stores being oligopolistic, it would be interesting to know if there isn't any price fixing. That being said, the music education sector in which I work and am a part of is semi-oligopolistic as well, though since the quality of teaching influences the rates one is able to charge, I would say that competition is alive and kicking. Music politics are mutated and kick-you-when-you-aren't-looking too, but then, that's another story.

And, thinking back again, I seem to recall some members of my first year economics class considering changing the greeting "Good morning, sir" to "Hail, King of the Apes". Sigh, the sad realities of avoiding expulsion and, as the Weasleys would say, disembowelment.


~tengman.k.~ said...

well... what about the violas?

AF said...

The viola market, being primarily co-owned by Monkeys Anonymous, has too large a financial base (in its other enterprise: banana exportation) to be concerned with such cases.

In other words: who cares?

Heh heh.