not that shop again?

Is it only me but have wonder the question, "Why do I always see 'bread n butter' in almost all the plazas?" Perhaps not only "bread n butter", but all the shops which are frequently seen by us. Seeing them literally all but everywhere, my reaction gradually turned "Aww, such a cool shop" to "Not again...” And the peculiar thing is that not merely one, however more than 5 shops always happened to be together in different plazas. Have any question mark ever pop out in your head that why such phenomenon existed? Apparently, I do.

In the perspective of economics, “THERE IS NO COINCIDENCE”.

To begin with, let's talk little about one of the market structure, monopoly. (If you thought I was talking about the cardboard game Monopoly, please take out your Eco textbooks and give a bookslap to yourself.) “Pure monopoly is represented by a market situation in which there is a single seller of a product for which there are no substitutes; this single seller is unaffected by and does not affect the prices and outputs of other products sold in the economy.” Bilas.

Little do you know, most of the malls we visit regularly in our free time are operated by Sino Group, Sun Hung Kei properties and Link REIT? Underneath their company, they owned myriad of retail stores as well.

Different group from society has been suspecting that they are adapting "Price Squeeze" in the market. Charging cheaper rent to their owned retail store, while charging extra expensive to its competitors.

"Price squeeze", is what we called in economics called to refer a circumstance in which a firm operates in both upstream and downstream markets. Then, use the power in upstream to supply factors of production to its competitors in an expensive price, so they would have no choice but to sell their products at a higher price so as to recover the cost. Meanwhile, it sells its goods at a cheaper price, which therefore would attract more customers than its competitors. As a result, those competitors could only earn a thin margin of profit, or even may suffer a lost. Those competitors, hence, would eventually leave the market. It is a kind of business practices which distort the market competition.

Simply speaking, "cheating".

To monopolist, they should originally produce at a quantity Q2, and set rent at P2. However, due to being rational, it will follow the rule, "marginal revenue (MR) = marginal cost (MC)", so as to maximize their benefit. So, its output would be Q1 and the rent is P1.

As a consequence of "Price Squeeze", what is truly scary is that the monopoly power of the dominant firm in the downstream become more powerful. Resulting a decrease competitors in the downstream market. Neighborhood stores are facing a huge danger in being disappear. At the end, citizens would have fewer preferences to enjoy when they are purchasing goods and services.

In fact, homogeneity of malls led to loss of appetite in me for going out shopping. Personally, I dislike these mass scales expansions of chain stores.