Competition, Neo-paternalism and the Nonsumer uprising
15 May 2018
Competition requires exchanges between the parties to be fair and free.
Free exchange implies customers can ‘walk away’ from a market without making a purchase if they are dissatisfied with the prices or services on offer.
Customers are not free to walk away from various markets despite those markets having been opened to competition. Customers’ ongoing participation in these markets is involuntary and largely inelastic.
In these ‘nonsumer’ markets, there is no guarantee the competitive process of discovery will work as expected or produce an efficient outcome.
In nonsumer markets, the competitive process will not reveal customers’ willingness to pay. It will merely reveal their willingness to shop around.
Neo-paternalism denies nonsumers the right or opportunity not to reveal their willingness to shop around.
This revealed information sees suppliers charging different prices to customers based on their willingness to shop around. This form of price differentiation differs from the price discrimination described in economic textbooks.
Price differentiation represents a wealth transfer between customers based only on their willingness to shop around. It has nothing to do with efficiency or equity.
With the passage of time, suppliers become more adept at price differentiating. This places an increasing burden on nonsumers to shop around even more.
The ever-increasing onus on nonsumers to shop around is leading them to become increasingly dissatisfied with competitive reforms in these markets.
When nonsumers are dissatisfied they can only express their dissatisfaction politically. Regulatory intervention is therefore endogenous to nonsumer markets.
Policy makers and regulators are gradually coming to terms with the challenges of nonsumer markets.
It remains an open to see whether technical innovations or new service models can circumvent the shortcomings of nonsumer markets