Retail prices are significantly influenced by factors other than costs of production. This seminar details some of the factors that limit competition and raise prices for consumers.

1. Sources of Pricing Power
Retail prices are significantly influenced by factors
other than costs of production
This seminar details some of the factors that limit
competition and raise prices for consumers
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

2. What determines the prices we
pay for goods and services?
classical economic theory states that basic market
structures determine price:
Perfect Competition
Monopolistic Competition
Oligopoly
Monopoly
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

3.  Why do prices fluctuate?
 Pricing during natural and man made disasters
 Price Gauging
 The strict definition of price gauging
 The broader definition of price gauging
 Classical theory of price fluctuation
 Examples of imperfect competition
Is it fair and reasonable to expect to pay
a fair and reasonable price?
 Free market, legal, regulatory and consumer options
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

4. What is price gauging?
Media coverage example:
http://youtu.be/R6ojYtKazgQ

5. What is price gauging?
Academic example:
http://youtu.be/h9QEkw6_O6w

6. Perfect Competition
Perfect Competition is a market in which buyers and sellers are so numerous and well
informed that all elements of monopoly are absent
The market price of a commodity is beyond the control of individual buyers and sellers
Characterized by a large number of small firms
Identical products sold by all firms
Freedom of entry into and exit out of the industry
Perfect knowledge of prices and technology
Perfect competition is a theoretical market structure primarily used as a benchmark
against which other market structures are compared.
Also called “perfect market” or “pure competition”
It is said that perfect competition efficiently allocates resources
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

7. Competition is basic and fundamental to
the free enterprise system
Competition is involved in all observable phenomena of a
market including
Prices at which products are exchanged
Kinds of the products produced
Quantities sold
Methods of distribution
Emphasis placed on promotion
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

8. Competition
Source: Sebastion09 at Slideshare.net

9. Value
It is believed that having more than one
business competing for the same consumers
will cause the products and/or services to be
provided at a better quality and a lower cost
than if there were no competitors
In other words, competition should provide
the consumers with the best value for their
hard-earned dollar
Source: Sebastion09 at Slideshare.net

10. ASPECTS OF COMPETITION
 Awareness
 Competitive advantage
 Technology
 Competitive differentiation
Source: Sebastion09 at Slideshare.net

11. Awareness
To be successful in today's very competitive business world, it is
important for businesses to be aware of what their competitors
are doing and to find a way to compete by matching or
improving on the competitors' product or service
For example, if Pepsi-Cola offers a new caffeine-free soda,
Coca-Cola may offer a new caffeine-free soda with only one
calorie
By offering an improvement on the competitor's product, Coca-
Cola is trying to convince soft-drink consumers to buy the new
coke product because it is an improvement on Pepsi's product
Source: Sebastion09 at Slideshare.net

12. Competitive Advantage
While being aware of the competition and making a
countermove is important, it is also very important to pay
attention to changing consumer wants, needs, and values and
to make the needed changes before the competition does
Doing research and development and being the first to provide a
new product or service can give a company a competitive
advantage in the marketplace
Having a competitive advantage means that a company
does something better than the competition
Source: Sebastion09 at Slideshare.net

13. Technology
One way to remain competitive is through the use of technology
Technology
Can help speed up production processes through the use of robots
or production lines
Can move information more accurately and more quickly through
the use of computer systems
Can stimulate and assist in research and development
Can facilitate transparency and accountability
Source: Sebastion09 at Slideshare.net

14. Competitive Differentiation
Competitive differentiation occurs when a firm
somehow differentiates its product or service
from that of competitors
Common ways to differentiate a product or
service include advertising, a better-quality
product, better service, better taste, or just
better brand image
Source: Sebastion09 at Slideshare.net

15. Imperfect Competition
Imperfect competition implies an industry or market in which one or
more of the following conditions exist:
Suppliers can influence prices
There are significant barriers to entry and exit
Goods and services are unique
Small number of suppliers and/or buyers
Information on pricing and process is not readily available
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

16. Forms of Imperfect Competition
Market structures generally included in the category of imperfect competition:
Monopoly
Oligopoly
Monopolistic Competition
Every industry or market operates in some form of imperfect competition. For example, some
industries rely on heavy initial capital investment, such as industrial manufacturers and telecom
providers. This makes the prospect of having many competitors practically impossible.
Markets are evaluated by their relative closeness to perfect competition
Are efforts made to approach Perfect Competition?
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

17. Perfect Competition
Large number
of buyer and
seller
Single
uniform Homogenous
price product
Source: Sebastion09 at Slideshare.net

18. Equilibrium Point
Source: Sebastion09 at Slideshare.net

19. Video: exploring a supply and demand price chart
http://youtu.be/MykJi8QVUWU?t=59s

20. Monopoly
Monopoly is a market in which a single firm is the only supplier of the goods or service.
Anyone seeking to buy these goods and services must buy from the monopoly seller. This
single-seller status gives the monopoly extensive market control. It is a price maker. The
market demand for the good sold by a monopoly is the demand facing the monopoly.
Market control means that monopoly does not equate price with marginal cost and thus
does not efficiently allocate resources.
Examples include utilities.
The four key characteristics of monopoly are:
(1) A single firm selling all output in a market
(2) A unique product
(3) Restrictions on entry into the industry, and
(4) Specialized information about production techniques unavailable to other potential
producers.
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

21. Single Supplier
Monopolies achieve their single-seller status for three interrelated reasons:
(a) Economies of scale
(b) Government decree, and
(c) Resource ownership
While a monopoly can emerge and persist for any one of these reasons, most
monopolies rely on two or all three
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

22. Unique Product
A monopoly achieves single-seller status because the good supplied
is unique. There are no close substitutes available for the good
produced by a monopoly
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

23. Barriers to Entry
A monopoly often acquires and generally maintains single seller status due to restrictions
on the entry of other firms into the market. Key barriers to entry are:
(a) Government license or franchise
(b) Resource ownership
(c) Patents and copyrights
(d) High start-up cost, and
(e) Decreasing average total cost.
These restrictions might be imposed for efficiency reasons or simply for the benefit of the monopoly.
Since barriers to entry are a general deterrent to competition, If entry barriers increase, then
competition will decrease.
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

24. Specialized Information
A monopoly often possesses information not available to others. This specialized
information generally comes in the form of legally-established patents, copyrights,
or trademarks
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

25. Advantages of monopoly :
Source: Sebastion09 at Slideshare.net

26. Disadvantages of monopoly
Lack of consumer
choice
No pressure to keep
costs down
Misallocation of
resources
Monopoly in strategic
sectors
Source: Sebastion09 at Slideshare.net

27. Oligopoly
This market structure is characterized by a small
number of relatively large competitors, each with
substantial market control. Oligopoly sellers exhibit
interdependent decision making which can lead to
intense competition among the few and the motivation
to cooperate through mergers and collusion
Examples include automobile manufacturing
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

28. Monopolistic Competition
This market structure is characterized by a large number of relatively small
competitors, each with a modest degree of market control on the supply
side. A key feature of monopolistic competition is product differentiation.
The output of each producer is a close but not identical substitute to that of
every other firm, which helps satisfy diverse consumer wants and needs
Examples include toothpaste and toilet paper manufacturers
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

29. Video: market structure overview (youtube.com, mjmfoodie's channel)
http://youtu.be/9Hxy-TuX9fs?t=12s

30. The Four Types of Market Structure
Number of Firms?
Many
firms
One Type of Products?
firm Few
firms Differentiated Identical
products products
Monopoly Oligopoly Monopolistic Perfect
Competition Competition
• Tap water • Tennis balls • Novels • Wheat
• Cable TV • Crude oil • Movies • Milk
Source: Sebastion09 at slideshare.net

32. Kinds of Numbers of Part of Degree of control over
competition product and Economy price
degree of where
differentiation prevalent
1 2 3 4
1. Perfect Many producer Few None
competition identical Agricultural
products commodities
2. Imperfect
Competition
a) Monopolistic Many Producers Retail Trade, Some
Competition Many Real Or Toothpaste,
Imaginary Soap etc
Difference in
Product
b) Oligopoly 1. Few producer Steel Some
Little or no Aluminum
difference in
product

33. Kinds of Numbers of Part of Economy Degree of control
competition product and where prevalent over price
degree of
differentiation
1 2 3 4
b) Oligopoly 2. Few Producers, Autos, Machinery Some
Some
Differentiation of
product
c) Monopoly Single Producer Few Public Considerable
Single Product Utilities
Without Close
Substitutes
d) Monopsony Single buyer Indian wagon Considerable
Single Outlet Industry
With Remote Local labor
Substitute Outlets markets
Dominated by
single firm

34. Kinds of Numbers of Part of Degree of control
competition product and Economy where over price
degree of prevalent
differentiation
1 2 3 4
e) Oligopsony Few Buyers 1. Milk Diaries Some
1. Little or no 2. Local Some
difference in Agricultural
buyers Market
Dominated by a
few processors
2. Difference in 3. Market for Some
buyers Certain
Components
such as auto
parts

35. Example: Honda Care extended warranty
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

36. Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

37. Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

38. 9/12/12 G mail - Hy annis Honda C are Information
Marcello Ritondo <mritondo123@gmail.com>
Hy annis Honda Care Inform ation
1 message
Request Form <questions@hyannishondacare.com> Tue, Aug 7, 2012 at 1:38 PM
Reply-To: Request Form <questions@hyannishondacare.com>
To: mritondo123@gmail.com
This email has been sent to mritondo123@gmail.com.
The following chart includes all the Honda Care coverage plans that are available for a
2009 Honda Accord 4cyl with 35700 miles.
Coverage Level $0 Deductible $100 Deductible
3 years/80000 miles $655.00 $555.00
3 years/100000 miles $810.00 $710.00
3 years/120000 miles $940.00 $840.00
4 years/80000 miles $705.00 $605.00
4 years/100000 miles $920.00 $820.00
4 years/120000 miles $1,050.00 $950.00
5 years/80000 miles $745.00 $645.00
5 years/100000 miles $960.00 $860.00
5 years/120000 miles $1,090.00 $990.00
Do you have a non-Honda or a Honda that no longer qualifies for Hondacare? Visit our
new website www.hyannishondaservicecontracts.com for more information.
Please contact Bob Leab at (508) 778-7878 for more information.
You may also reply to this email.
The following comment has been sent to Hyannis Honda.
You will receive a seperate response shortly.
I'm interested in 1 YR interest free financing. Marcello Ritondo 373 Grand Ave Apt 4
Brooklyn, NY 11238 347-768-4290
Presented by Marcello M. Ritondo at the Henry George School of
https://mail.google.com/mail/u/0/?ui=2&ik=58f408c03f&v iew =pt&cat=H onda&search=cat&th=139022a3…
Social Science in New York City on September 28, 2012.

39. Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

40. Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

41. Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

42. After initial startup costs including research and development, design and
testing of the lenses, development of the manufacturing process and highly
specialized equipment, what is the current production cost per lens?
What is the marginal profit per contact lens?
Is or should this information be available as public record?
What are the barriers of entry for this market?
Should medical devices be treated differently?
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

43. Additional Examples
Prescription costs
College textbooks
Health care and Insurance premiums
Emergency room visits
Airline prices for last minute flights
$ 2.79+ per min for long distance calls!
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

44. video: a closer look at healthcare insurance premiums
http://youtu.be/C4mJR3GCtDw
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

45. Conclusion
Open Questions
Is it fair and reasonable to expect to pay
a fair and reasonable price?
 Free Market, legal, regulatory and consumer options
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.

46. additional references
www.amosweb.com
www.investopedia.com
businessdictionary.com
oxforddictionaries.com
slideshare.com
Presented by Marcello M. Ritondo at the Henry George School of
Social Science in New York City on September 28, 2012.