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Market Experiments -a case of imperfect competition-

Written by Khodori Eko Purwanto

3008 011 22

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What…

-Producer with market power-Small number of producers are competing in the market with big market

share and power to control demand and supply.

-Non standard products-The products do not have standardization in feature or composition,

even from a producer.

-High entry barriers-It is relatively difficult to enter into the market.

Characteristics of imperfect competition

-Low information-Producers and consumers can not obtain sufficient information

about the product, price, and market.

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Reported Data

Analysis

Survey Regulated price

How…

52 65 65 71 76 100 90

70 62 70 70 80 83 95

90 70 80 65 79.99 50 65

95 75 81 65 78 73 60

Seller

Buyer

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How…

No Seller Buyer1 52,000 95,0002 62,000 90,0003 65,000 81,0004 65,000 80,0005 70,000 79,9996 70,000 78,0007 70,000 75,0008 71,000 73,0009 76,000 70,000

10 80,000 65,00011 83,000 65,00012 90,000 65,00013 95,000 60,00014 100,000 50,000

0

20,000

40,000

60,000

80,000

100,000

120,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

y = 3092.3x + 51736

0

20,000

40,000

60,000

80,000

100,000

120,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

y = 3092.3x + 51736

0

20,000

40,000

60,000

80,000

100,000

120,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

y = 3092.3x + 51736

y = -2780.2x + 94209

0

20,000

40,000

60,000

80,000

100,000

120,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

3,092.3 X + 51,736 = - 2,780.2 X + 94,209

X = 7.2325 Y = 74,101.14

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How…Buyer/seller 52,000 62,000 65,000 65,000 70,000 70,000 70,000 71,000 76,000 80,000 83,000 90,000 95,000 100,000

50,000 0 0 0 0 0 0 0 0 0 0 0 0 0 060,000 4,000 0 0 0 0 0 0 0 0 0 0 0 0 065,000 6,500 1,500 0 0 0 0 0 0 0 0 0 0 0 065,000 6,500 1,500 0 0 0 0 0 0 0 0 0 0 0 065,000 6,500 1,500 0 0 0 0 0 0 0 0 0 0 0 070,000 9,000 4,000 2,500 2,500 0 0 0 0 0 0 0 0 0 073,000 10,500 5,500 4,000 4,000 1,500 1,500 1,500 1,000 0 0 0 0 0 075,000 11,500 6,500 5,000 5,000 2,500 2,500 2,500 2,000 0 0 0 0 0 078,000 13,000 8,000 6,500 6,500 4,000 4,000 4,000 3,500 1,000 0 0 0 0 079,999 14,000 9,000 7,500 7,500 5,000 5,000 5,000 4,500 2,000 0 0 0 0 080,000 14,000 9,000 7,500 7,500 5,000 5,000 5,000 4,500 2,000 0 0 0 0 081,000 14,500 9,500 8,000 8,000 5,500 5,500 5,500 5,000 2,500 500 0 0 0 090,000 19,000 14,000 12,500 12,500 10,000 10,000 10,000 9,500 7,000 5,000 3,500 0 0 095,000 21,500 16,500 15,000 15,000 12,500 12,500 12,500 12,000 9,500 7,500 6,000 2,500 0 0

Average price of seller = 74,929 Average price of buyer = 73,357

Price range : ¥ 71,000 - ¥ 74,000Number of deal : 8 deals

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Conclusion…

Interest: increase the taxable income from seller and buyer.

-Government in imperfect competition-

Require to push the profitable deal happened by market intervention.

Based on the survey and analysis from Statistics Bureau: What the government should do?-Imposing the highest retail price for producers-

In this case, the producers must sell their products below the highest price of ¥ 74,000. Producers can not sell the products more than ¥ 74,000.

The government do not have to regulate the buyers’ price. It will be adjusted by itself due to the imposing of highest retail price.

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ARIGATOU