5 gallon water companies meet - Khaleej Times:
---QUOTE---
The Press conference was attended by representatives of more than 40 water companies operating in the UAE.
...
“We have been meeting for the past six months to discuss the continuous increase in the prices of raw materials, and the overall cost of living in the UAE. For the past two years, there was no increase in the price of 5 gallon water bottles, which are considered very economical."
...
“The decision to increase the price was a unanimous agreement taken by all the 5 gallon water companies, though we had endeavoured to postpone it for a long time. The rise by one dirham is not for profit, but to help in absorbing the tremendous increase in the prices of raw materials, such as oil prices that affect in the distribution of the water bottles."
--UNQUOTE---
Evidently, the 5 gallon water market is not a competitive market. Otherwise, the increase in the price of raw materials would have been more quickly reflected in higher prices of 5 gallon water bottles. When prices are administered, by government or through a cartel, price changes come less frequently, in bigger jumps.
UPDATE: Today's Gulf News brings news of a water company promotion. It is not clear what size Masafi was promoting. If it was 5 gallon bottles, then we have a classic example of increase in quality to get around price controls or cartel pricing.
---QUOTE---
The Press conference was attended by representatives of more than 40 water companies operating in the UAE.
...
“We have been meeting for the past six months to discuss the continuous increase in the prices of raw materials, and the overall cost of living in the UAE. For the past two years, there was no increase in the price of 5 gallon water bottles, which are considered very economical."
...
“The decision to increase the price was a unanimous agreement taken by all the 5 gallon water companies, though we had endeavoured to postpone it for a long time. The rise by one dirham is not for profit, but to help in absorbing the tremendous increase in the prices of raw materials, such as oil prices that affect in the distribution of the water bottles."
--UNQUOTE---
Evidently, the 5 gallon water market is not a competitive market. Otherwise, the increase in the price of raw materials would have been more quickly reflected in higher prices of 5 gallon water bottles. When prices are administered, by government or through a cartel, price changes come less frequently, in bigger jumps.
UPDATE: Today's Gulf News brings news of a water company promotion. It is not clear what size Masafi was promoting. If it was 5 gallon bottles, then we have a classic example of increase in quality to get around price controls or cartel pricing.
posted by John B. Chilton at 4/09/2005 02:20:00 PM
2 Comments:
There are over 40 of them? And each one thinks all the others would keep their prices down even if one raised its price and even if the costs for all of them increased?
Is there a possibility of getting a gubmnt grant to study and model this industry?
Wild, huh? Despite the lack of mention of government in the story I suspect the hand of government supporting a cartel. By territorial assignment perhaps? (5 gallon thingies are delivered door to door.)
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