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Testing for Imperfect Competition

Testing for Imperfect Competition. NY’s Fulton Fish Market. Take an obviously Competitive Market Study the players: Customers Dealers Fishermen. Fulton Fish Market. Look for collusion on the part of buyers or sellers Note buyers: race, price, cash or credit Dealers uniformly white

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Testing for Imperfect Competition

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  1. Testing for Imperfect Competition NY’s Fulton Fish Market

  2. Take an obviously Competitive Market • Study the players: • Customers • Dealers • Fishermen

  3. Fulton Fish Market • Look for collusion on the part of buyers or sellers • Note buyers: race, price, cash or credit • Dealers uniformly white • Players are uniformly Male

  4. Fulton Fish Market • Fishermen bring in their catches of whitfish by 5 AM Monday thru Friday • Dealers are selling 60lb boxes of fish • Sell to buyers for 1 chain store, and many small stores and Fry shops in the area • Market hours are 5 to 7 AM

  5. Competitive ? • Buyers who are equally costly to service pay different prices. • 3rd Degree price discrimination

  6. Mafia ? • The docks are controlled by the Mafia • All loading and unloading • Ease of entry…

  7. Dealers • 6 Whitfish dealers • Graddy was permitted at one

  8. Price Discrimination • Enabling Environment • - No arbitrage – little social contact • - Buyers unaware of others prices

  9. Demand • Loglinear of price • Log P = a + a log Q + e

  10. Marginal Cost • Weather is the primary determinant of the fishes value; harsher the higher • MC = MC(q, W) • Prices vary from 70 cents/lb to 1.75/lb

  11. Conclusions • 1. Karen is only woman in market • 2. One dealer was observed • 3. Dealers don’t fish; fishermen don’t deal • 4. Dealers have own marginal costs • 5. Market is more an auction of derivatives • 6. Asian buyers buy 69% • 7. White buyers buy 27%

  12. New Study? • I suggest a new study in either Los Angeles’ Grand Market • Or LA’s Fashion district alley • One with many buyers and sellers

  13. Milton Friedman • 1912 – 2006

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