Definition: Monopoly is the kind of market with only “one seller” and its goods has no close substitutes. It is a price- searching market of which sellers search prices to maximize wealth.

$19.00/catty

Mainland Pigs NG FUNG HONG( 五豐行 ) Sole Pork Supplier &Wholesaler Park’N Shop Wellcome Wet Market Butchers Others Food Stores Retailers

Ng Fung Hong is the sole agent selling imported mainland pigs Everyday, about 5,500 pigs are imported from the mainland and consumed in HK. All of them are slaughtered and sold to the market retailers by Ng Fung Hong Only.

In economic sense, the pork wholesaling market is a monopoly and Ng Fung Hong is a monopolist. Why is it a monopolist?

 Sole ownership of essential resources or production technique  Patents or Copyrights  Monopoly right  Natural monopoly  Government franchise  Formation of cartel

Why is it a monopolistic competition? Definition: It is the kind of markets with A large number of sellers who are small and not associated. ( Within a district, there are many isolated wet market butchers and supermarkets) Heterogeneous products ( Different shops may have different service and techniques ) Imperfect information Free entry and exit

Sellers include: Park’n shop Wellcome Wet market butchers Monopolistic Competition

The pork retailing market is now in a monopolistic competition, Park’n shop and Wellcome may try to use price-cutting to drive away the small wet market butchers. In this way, Park’n shop and Wellcome can enlarge their market share and may turn the market into an oligopoly. Monopolistic Competition Oligopoly Besides, the supermarkets also want to change the traditional culture of buying food from wet market to buying from supermarket.

Imail (7 May) …...Park n Shop announced on Friday that it would ``permanently'' cut the price of pork to an average HK$19 per catty and Wellcome followed ……. What implication can we get from this news?

The pork retailing market is now in a monopolistic competition, Park’n shop and Wellcome may try to use price-cutting to drive away the small wet market butchers. In this way, Park’n shop and Wellcome can enlarge their market share and may turn the market into an oligopoly. Monopolistic Competition Oligopoly Besides, the supermarkets also want to change the traditional culture of buying food from wet market to buying from supermarket.

How can they be able to take such action? Here are the possibilities: Ng Fung Hong, the pork supplier, may have given them a discount that enables them to have a lower price. (but it can not be proved yet) They are large corporations, therefore, they have the sufficient capital needed such as Park’N Shop under Hutchison Whampoa Limited, Wellcome under Dairy Farm International Group. They buy pork in bulk, thus they can have a lower average cost than the isolated butchers.

END THE MONOPOLY OF NG FUNG HONG…….WE CAN GAIN FROM IT!!!! Some people, e.g. the Butchers, demanded:

Can we really gain from ending the monopoly of Ng Fung Hong? Some people argued that after end of monopoly, 1.The price of the pork will not be so easily controlled by Ng Fung Hong. 2.More choices of wholesalers can be given to the retailers.

However, there are disadvantages as well, Before, Ng Fung Hong Retailers

AFTER, Retailers A B E C D F

However, there are disadvantages as well, Before, Ng Fung Hong Retailers MORE EFFICIENT

AFTER, Retailers A B E C D F LESS EFFICIENT

The benefits of the continuation of Ng Fung Hong’s monopoly Reduce Transaction cost Better quality control - Ng Fung Hong centralizes the monitoring of the feedstuff and the quality of the imported mainland pigs.

Our Opinion: Customers may now be happy about the cutting prices of pork of supermarket. However, we believe that if the situation continues, it will not be good for the customers since wet market may be replaced by supermarket and disappear forever. Then prices will be more easily controlled and customers will also be left with fewer choices.

Group member: 6A Cherry Cheung (9) Elaine Ng (21) Sarah Wong (27)