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China pollution: Beijing issues first red smog alert - BBC News

China pollution: Beijing issues first red smog alert - BBC News | Pre-U Microeconomics | Scoop.it
Schools in Beijing are to close and outdoor construction to stop after the Chinese capital issued its first "red alert" over smog levels.
Mo Tanweer's insight:

Externalities...

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Mapped: the spread of coffee shops across the UK

Mapped: the spread of coffee shops across the UK | Pre-U Microeconomics | Scoop.it
This gif shows what the spread of coffee shop culture over the last five years looks like as the number of major chain cafes spills over 5,000

Via Graham Watson
Mo Tanweer's insight:

Monopolistic competition

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Graham Watson's curator insight, December 7, 2015 3:00 AM

An interesting little peek at café society and its spread in the recent past. We are drowning in cappuccino, as the number of main chains reaches 5,000 plus.

 

In Winchester alone there are 6 of the major chains, but if you add in independents, and other stores that sell coffee, I think that there are nearly 30 outlets that serve coffee within 5 minutes walk of the city centre. But this then begs the question whether all of these outlets are in the same market: of course, they aren't.

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Tesco plastic bag use 'down 80%' since 5p charge - BBC News

Tesco plastic bag use 'down 80%' since 5p charge - BBC News | Pre-U Microeconomics | Scoop.it
The number of plastic carrier bags taken home by Tesco shoppers in England has dropped by 80% since the 5p charge was introduced, data suggests.
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Tax on sugary drinks backed by MPs - BBC News

Tax on sugary drinks backed by MPs - BBC News | Pre-U Microeconomics | Scoop.it
A tax on sugary drinks should be introduced as part of a "bold and urgent" set of measures to tackle child obesity in England, MPs say.
Mo Tanweer's insight:

Tax on sugary drinks...

Demerit good...

PED?

 

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StartupSmart - Airbnb introduce Uber-style surge pricing model


Via Kabir Mishra
Mo Tanweer's insight:

Very interesting - lots of issues to discuss here:

Is this attempt to turn producer surplus into consumer surplus going to work?

Is it price gouging?
Is it actually going to help alleviate some price pressures by incentivising more people to put their apartments on the website during peak seasons or peak events e.g. Rio Olympics?

 

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Kabir Mishra's curator insight, November 23, 2015 2:10 PM
This is not as simple as increasing/decreasing the price of a unit depending on the marginal utility it offers consumers. However, if firms are looking to minimise consumer surplus, the surge pricing model is ideal.
Mo Tanweer's comment, November 27, 2015 7:56 AM
Wow - v interesting... this is totally aimed at reducing CS!! I hadn't spotted this in the news. Although here's an interesting point... will the surge pricing (in say certain parts of cities or times of year) lead to a higher quantity supplied of apartments / homes available too as more people will be tempted to put their homes on the website now. I imagine surge pricing would definitely help around the Rio Olympics in Brazil to get more supply of properties online too.
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Ikea Buys Romanian, Baltic Forests to Control Its Raw Materials

Ikea Buys Romanian, Baltic Forests to Control Its Raw Materials | Pre-U Microeconomics | Scoop.it
Buying the forest for the trees gives the Swedish company control over timber costs.
Mo Tanweer's insight:

Backward Vertical integration 

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Virgin Media criticises watchdogs over 'flawed' analysis of BT-EE deal

Virgin Media criticises watchdogs over 'flawed' analysis of BT-EE deal | Pre-U Microeconomics | Scoop.it
Cable operator calls for competition rethink to protect Virgin Mobile and consumers from price rises
Mo Tanweer's insight:

Anti-competitive issues abound in this horizontal merger - significantly reducing the concentration ratio in mobile network market

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AstraZeneca joins with pharmaceutical bodies to urge new antibiotics funding - BBC News

AstraZeneca joins with pharmaceutical bodies to urge new antibiotics funding - BBC News | Pre-U Microeconomics | Scoop.it
AstraZeneca and pharmaceutical bodies warn of a "terrible human cost" unless new ways of funding antibiotics are found.
Mo Tanweer's insight:

Are antibiotics a merit good? Underprovided by the free market? 

Or are they demerit goods? Overconsumed by the free market? 

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United’s attempt at further dominating Newark airport hits a snag

United’s attempt at further dominating Newark airport hits a snag | Pre-U Microeconomics | Scoop.it
WHEN it merged with Continental Airlines in 2010, United Airlines assumed control of the vast majority of flights at Newark International Airport, a Continental hub....
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Are big mergers bad for consumers? - BBC News

Are big mergers bad for consumers? - BBC News | Pre-U Microeconomics | Scoop.it
Are big mergers bad for consumers?
By Daniel Thomas
Business reporter
30 October 2015
From the section Business
Image copyrightThinkstock
This year is set to be a record for company deals. A whopping $4.1trn (£2.7trn) of mergers and acquisitions (M&A) are tipped to take place globally in 2015, an all-time high.
In October alone, home computing giant Dell agreed to buy the network storage company EMC for hefty $67bn.
And AB InBev offered £70bn for rival SAB Miller in a deal that would result in it selling one in three beers on the shelf globally.
But while such mergers are designed to be advantageous for the companies involved - extending their reach, say, or reducing their costs - it is unclear whether they also benefit consumers.
Credit Lyonnais Securities Asia has pointed out that AB InBev has a history of buying up competitors and then steering consumers towards pricier beers.
And John Colley, associate dean at Warwick Business School, tells the BBC: "Generally speaking, as industries consolidate down to fewer players, prices increase because there is less competition.
"You tend to end up with less choice of products too," he adds.
Image copyrightGetty Images
Image caption
Some fear that a merger between AB Inbev and SAB Miller may lead to higher prices
Competition
So just how worried should consumers be, and what can they do to protect themselves?
In the last six financial years, the UK's Competition & Markets Authority (CMA) and its predecessor the Competition Commission (CC) have had 50 mergers referred to it, of which half were cleared.
That said, it has imposed 'remedies' - typically divestments - on nine occasions and prohibited four deals, while a further nine were abandoned when referred to the regulator.
Sheldon Mills, senior director of mergers at the CMA, says the regulator's main concern is "whether one competitor leaving the market allows others to increase their prices".
"For instance, we would look at whether the two firms compete in the same market - an easy analogy is Coke and Pepsi.
"Then we would ask whether the two firms are 'close' - do they respond to each other on prices, do they advertise against each other, do they respond to each other on the quality of their stores or brand."
He gives the example of Reckitt Benckiser's acquisition of sexual lubricants firm K-Y in August.
Reckitt, which owns rival provider Durex, stood to hold 75% of the UK's lubricants market after the deal, but the CMA said this would push up high street prices.
So while it approved the merger, the CMA ruled that Reckitt Benckiser should licence out the K-Y brand in the UK for eight years to a competitor, to give a rival time to develop a new brand to challenge Durex's range.
Image copyrightGetty Images
Image caption
After Aldi and Lidl entered the UK supermarket scene, prices fell
Robust prices
However, by its own admission, the CMA's remedies do not always achieve the desired effect.
And as Dr Colley warns, the regulator usually only looks at a deal if the combination creates at least a 25% market share.
"Let's say an industry has 10 key players and each has 10% of the market," he says.
"If five of them joined up that might be acceptable to the competition authorities, but rest assured prices will become more robust."
He points to research showing that the greater market power arising from mergers "typically results in higher prices".
And he says studies consistently find "between 60% and 80% of acquisitions fail to deliver the expected benefits to shareholders, too".
"I've sat on the other side of the fence for long enough in my life," says the former company chairman and managing director.
"Normally when you construct your public relations you have to make a merger sound like it is in the consumer's interest - but the truth is often not that."
Image copyrightGetty Images
Image caption
There are now four major airlines operating domestic flights in the US, down from seven in 2007
'Consumer positive'
But Scott Moeller, director of the M&A Research Centre at Cass Business School, disagrees.
According to his research, while mergers do push up prices in the short term they are "usually consumer positive" in the long term.
"The costs to mergers tend to come straight after the deal happens," he explains.
"So when a company's looking for synergies, the first thing they might have to do is fire some people or close down a plant."
He says that as a result, a company may try to offset this by pushing up prices.
"But, over time they can operate more efficiently because they get the savings they predicted, and that ends up benefitting customers," he says.
He cites a study in the American Economic Review which looked at the US high street banking sector.
It found that right after a merger, customers did start getting worse rates of interest paid into their bank accounts, but "in year two and three they actually got better rates".
Image copyrightReuters
Image caption
Ab Inbev boss Carlos Brito says the deal with SAB Miller will bring "more beers to more people"
An imperfect science
Complicating matters, both academics concede that industries are always evolving all the time and this can offset the effect of mergers.
As Dr Colley points out, after a period of merger activity, the UK's supermarket industry has just four big players, holding more than 70% of the market.
But while this initially pushed up prices, low cost chains such as Aldi and Lidl emerged and "now prices are collapsing as the big four lose share".
Similarly, after a spate of big tie-ups, four major airlines operate the majority of domestic flights in the US, down from seven in 2007.
And according to a report by the US Government Accountability Office last year, from 2007-2012 airfares went up by 4% and flights got busier.
However, the agency also found the mergers had led to new connections in some markets and allowed the bigger operators to return to profitability following the recession.
They had invested in new planes and services such as early boarding and entertainment options which improved the customer experience.
With major investigations underway in the UK into heavily consolidated markets, such as energy and banking, consumers would be wise to remain on their guard.
Regulators around the world are already scrutinising the AB InBev deal for fear it will reduce competition, too.
Chief executive Carlos Brito has promised the merger will bring "more beers to more people and enhance value for all of our stakeholders".
But if the price of a pint goes up, he'll have a lot of unhappy customers to answer to.
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Asda to shun Black Friday sales - BBC News

Asda to shun Black Friday sales - BBC News | Pre-U Microeconomics | Scoop.it
Supermarket Asda says it will not take part in the shopping discount day known as Black Friday, which it helped to bring to the UK just two years ago.
Mo Tanweer's insight:

Asda joins a couple of other firms to say it won't take part in the annual Black Friday event - in recent years its ended up being a huge mutually destructive price war which ends up cutting into profits. Though their rationale seems to be more about reputation. The prisoners' dilemma aspect of it means that its hard to be the first to stop doing something like this.

Link to elasticity?

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Seattle Announces $15 Minimum Wage, Highest In The U.S.

Seattle Announces $15 Minimum Wage, Highest In The U.S. | Pre-U Microeconomics | Scoop.it
After four months of negotiating, restaurant owners, labor leaders, and businesspeople in Seattle struck an accord to raise the minimum wage to $15.
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World - BBC News

World - BBC News | Pre-U Microeconomics | Scoop.it
Get the latest BBC World News: international news, features and analysis from Africa, the Asia-Pacific, Europe, Latin America, the Middle East, South Asia, and the United States and Canada.
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Rail Fares To Rise By 1.1% From January

Rail Fares To Rise By 1.1% From January | Pre-U Microeconomics | Scoop.it
The increase, which comes into effect on 2 January, 2016, is the smallest rise in rail fares for six years.
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An Introduction to Behavioral Economics *

Dr Alain Samson's Introduction to Behavioral Economics - Behavioral Science for Beginners
Mo Tanweer's insight:

An introduction to key behavioural economics concepts

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New opt-out system in Wales aims to revolutionise organ donation

New opt-out system in Wales aims to revolutionise organ donation | Pre-U Microeconomics | Scoop.it
First presumed consent law in the UK comes into effect next week, offering hope to thousands awaiting a transplant
Mo Tanweer's insight:

Merit goods... Nudges... Default bias... Status quo bias... Behavioural economics... Improving outcomes in a market where the price mechanism does not work 

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Shoppers descend on Black Friday deals

Shoppers descend on Black Friday deals | Pre-U Microeconomics | Scoop.it
Black Friday is now a multi-day marathon of markdowns, and it started on Thanksgiving Day.
Mo Tanweer's insight:

How price elastic are consumers? Another fall in revenue for firms? Prisoners' Dilemma? 

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BT share price: Telco criticised by regulators for billing £1.7m EE cost to Openreach

BT share price: Telco criticised by regulators for billing £1.7m EE cost to Openreach | Pre-U Microeconomics | Scoop.it
Ofcom labels move ‘inappropriate’
Mo Tanweer's insight:

The knock on effects of having (natural) monopoly power - consumers will see prices rise... !

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Tobacco tax keeps on rising as revenues go up in smoke » Tobacco Manufacturers' Association

Tobacco tax keeps on rising as revenues go up in smoke » Tobacco Manufacturers' Association | Pre-U Microeconomics | Scoop.it
Mo Tanweer's insight:

Is demand for cigarettes as price inelastic as in the past? 

Higher taxes on cigarettes not delivering higher tax revenue any more... 

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A tale of two Lidls: is the supermarket ready for an upmarket rebrand?

A tale of two Lidls: is the supermarket ready for an upmarket rebrand? | Pre-U Microeconomics | Scoop.it
In attempting to lure upmarket customers from Waitrose and M&S, 150 of the group’s 629 stores will be refitted with modern touches
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Marriott International buys Starwood Hotels in $12bn deal - BBC News

Marriott International buys Starwood Hotels in $12bn deal - BBC News | Pre-U Microeconomics | Scoop.it
US hoteliers Marriott International and Starwood Hotels agree to create world's biggest hotel company with a $12.2bn deal.
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Tom Prentis's curator insight, November 17, 2015 4:09 AM

Biggest hotel merger in history $12.2billion £8bn - 5,500 hotels worldwide

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Consumers face ticket resale 'stitch-up', says Which? - BBC News

Consumers face ticket resale 'stitch-up', says Which? - BBC News | Pre-U Microeconomics | Scoop.it
The consumer group Which? calls for a crack-down on ticket resale sites, arguing that consumers face a "stitch-up".
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10 ways to cool the housing market

10 ways to cool the housing market | Pre-U Microeconomics | Scoop.it
With house prices becoming unaffordable for many, the Bank of England is raising expectations that it will act soon to help cool the market.
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The ‘black hole’ of Chinese carbon trading - FT.com

The ‘black hole’ of Chinese carbon trading - FT.com | Pre-U Microeconomics | Scoop.it
One man is scrolling slowly through his emails. Another is flopped across his desk doing a good imitation of being asleep. It is a Wednesday afternoon at the China Beijing Environment Exchange, a centrepiece of China’s closely watched efforts to
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