Price

While planning to go to Osaka in the middle of this week, I made some exchange for Japanese Yen.

I did it in a small shop of the shopping mall next to where I live. Well, the charge was considerable, but I was more than happy to pay that extra bit: it opens till late hours, and the attendant appears quiet and studious.

That's how small shops - without the advantage of scale - survive. After all, price is not everything. Many of us are willing to pay for convenience and service.

And that's the thing some Mr. Tsang went wrong. What's the point of (using government subsidy for) setting up an elaborated system to compare the price of every bread-and-butter need between various supermarkets and local stores ? Would that help to bring the price down ? No, don't be silly. That simply makes the price uniform - and exactly because the information on price is readily available and your competitor could easily follow - no one would have the incentive to lower the price.

(This argument is not my invention; it is something taught in the first month for any introductory course on game theory.)

Further, a policy of this kind is a subconscious advertisement that customers should focus on price and nothing else. Because large business has a higher bargaining power with the supplier, they make a better profit (or have a better chance of survival) when the price is fixed.

In other words, it encourages monopoly (or oligopoly).

Oh, maybe he's not wrong - that's what he aims for after all.