Fixing prices may seem like a more surefire way of doing things but it has proven to be impossible to implement so far. Plus, its notoriously difficult to determine the optimal price. But suppose the government does manage to enforce an ideal fixed price, if and when the production costs of sugar increase, the fixed price will drive mills to bankruptcy, creating a genuine supply crisis. And if the government then decides to raise the price for legitimate reasons it will have a political disaster on its hands. Better to let the market take care of all that and let the CCP do its real job.
Showing posts with label supreme court. Show all posts
Showing posts with label supreme court. Show all posts
Monday, October 5, 2009
Competition Commission forced by the SC to discourage competition
Has anyone noticed the Supreme Court's recent instructions that the Competition Commission Pakistan fix the price of sugar? I'm assuming that it is not entirely awake to the irony of a competition watchdog fixing prices. Its Econ 101 Mr. Chief Justice. The way to ensure that sugar finds its optimal price is to strictly impose anti-cartel laws. If each sugar mill is setting its price independently, the retail cost will come down automatically: without an agreement between mills, it is in the interest of every mill to keep its prices as low as possible to get an edge over the competition.
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