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Monthly Archives: January 2012

Is Australia suffering the curse of supermarket duopoly? The layman would probably answer with an emphatic yes. Practical experience affirms our intuition. Whenever an independent competitor arises, Coles and Woolworths quickly stamp them out. With Coles’ latest campaign to halve fresh fruit prices, Australian farmers are crying poor once again and the evidence is mounting for what we all know. Or what we suppose we know.

You see, the question is entirely wrong. ¬†There is no such thing as a single ‘supermarket’ market – it is an aggregation of several sub-markets loosely labelled as a market. Whether it is anti-competitive for Woolworths to drop its milk prices is a very different question from whether it is anti-competitive for Coles to drop its fresh food prices. The supply chains are different; the competitors are different; consumer demands are different. Whilst Woolworths was on pretty firm legal and economic ground by dropping milk prices, Coles may be on shakier ground.

Coles and Woolworths hold a massive market share in staple foods, but a much smaller market share in fresh food. The reason for this is obvious when you think about it. Fruit and veg from Coles is simply of a lower quality than from independents. Or, to put it in econo-speak, it’s a heterogenous good and the large chains’ quality control simply isn’t as effective as a small fruit store owner who inspects fruit himself and buys the best. Milk, on the other hand, is a homogenous good.

Coles may be seeking to drop fruit prices now, then when the mum and dad stores are bankrupted, it can raise them again. Or, Coles’ strategy may be to get people in the door more frequently; you only buy staples once or twice a fortnight; you buy fresh fruits far more frequently. The first strategy is anti-competitive; the second is pro-competitive. We just can’t tell which it is.

Coles’ clearly has market power in the sub-market for staple foods. It is using this market power to gain market share in another sub-market in which it doesn’t have as much market power, fresh foods. Whether this use of market power breaches the Competition and Consumer Act will turn on details I simply don’t have on hand.

Wow РI was going to write a research paper on exactly this issue when I studied copyright law last semester: http://www.theatlantic.com/business/archive/2012/01/over-aggregators-pay-up/251496/

The legal issues are complex for aggregators. An aggregator, which by definition copies a copyrighted work, is committing a breach of copyright. Ordinarily, however, providing an RSS feed would seem to provide an implied licence to that breach (ie there is consent). That implied licence may be modified by an express licence, such as a Creative Commons licence.

I never ended up writing the paper, but I did notice that Creative Commons prevents uses that are for ‘commercial purposes’. What this means has never been tested in a court of law. It would seem that a news aggregator who profits from advertising is in breach of that licence.

(There are many other complex copyright issues that arise from the issue)

Education policy has been a pet topic of mine, even if I haven’t mentioned it on this blog. The Atlantic writes an interesting analysis of the Finnish model, which has become rather fashionable in education policy circles of late.

Basically, the article says the Finnish focussed on giving every student an identical experience – having no private/public divide, by providing equal services to everyone like individualised counselling, free lunches etc. What was the result? The Finns top the PISA league tables (international standardised tests that allow comparisons between educational performance in different countries)

Without knowing too much about the Finnish system, isn’t this just a result of simple math? If the American system selects the very brightest kids and gives them the best training to the detriment of the less bright then the rules of mathematics tell us that we should expect lower test scores compared to Finland which seeks to improve every child. For example, if we start with an 80% average grade for two countries, and in America the smartest 20% are trained so well they achieve a 100% mark whilst the mediocre students keep the same mark, the average mark will drift upwards by a tiny bit to 84%. Whereas, in Finland, if every child’s mark goes up by 5% then obviously the average will rise to 85%. And yet, it would be a miracle if the US could get an entire 20% of its population to score perfectly in such standardised tests.

To put it more simply, two factors will keep the US from performing better in the rankings. The improvement of marks in the smart students is diluted by the lack of improvement in mediocre students, whilst any improvement in the average Finn translates into a direct improvement in their PISA scores. Furthermore, there is a ceiling on what smart students can achieve – noone can achieve a 110% mark.

So the question ceases for a while to be a practical question and becomes a moral question. Do we want to ensure equity of education to every child? Or do we want to ensure the smartest kids can reach their full potential?

We cannot divorce practicalities from our analysis. My example assumed the top-performing students were ‘the smartest’, but the American ¬†education system doesn’t favour the smart. It favours the rich and the lucky. Even in Australia and Britain, with their selective public schools, standardised entry tests are only a rough proxy for true intelligence. On the other hand, society only requires its future adults to have a minimum level of knowledge. Every society must have its janitors as well as its professionals. (Again, the moral question arises – Shakespeare is no more useful to an investment banker than a janitor). And a failure to perfectly identify the smartest students doesn’t mean we should abandon the quest to give the smartest students the best opportunities to foster their learning.