German pharmacy firm plans to open more than one hundred pharmacies in Sweden, since Swedish government decided to end forty years of state monopoly and deregulate the pharmacy industry. Some people may think that it would be good for Swedish pharmacy market and social welfare, and the market may competitive and social welfare will be increase.
But, it may be start of another monopoly. Since the market was monopolized by state, new firm trying to enter the market may have less strategies and less economic scale. If German pharmacy firm finished setting up their pharmacy market, they will do something like advertise more, decrease the price and offer better service to make new firms difficult to enter the market. Also, social cost may be more increase than the social cost when market was monopolized by state. When state controlled market they would probably tried to minimize the social cost because they are also part of government and know what part of government should do over social welfare.
But German pharmacy firm is different than state. They will try to maximize the profits and they may success to have monopoly power over Swedish pharmacy market which will increase deadweight loss. Swedish government should think about that before German firm encroach Swedish pharmacy market.
GooYong Chung
http://www.forbes.com/feeds/ap/2009/07/01/ap6608646.html
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment