Notes to Submission to the Productivity Commission Inquiry into the ...

More documents

Recommendations

Info

Non-Contestable Markets: Low Supply and High PriceThe goods and services which are needed to assist people with disabilities offset ordinaryday to day obstacles are higher in price and supplied in lower quantity than they would beif the goods were produced in competitive markets. This is because many of the goodsand services, such as wheelchairs, hearing and seeing devices, personal care provision,education services etc. are supplied by only one or a small number of firms and thereforetake place in markets where there is little competition.In the popular mind, monopolies and oligopolies are associated with large multinationalor government-owned business. This is of course a misconception since even small firmscan have 100% of the market and therefore be a monopoly. The monopoly may bethrough ownership of a valuable patent or secret technique, or it may result from the sizeof the market being small relative to the output level that would enable the firm toproduce at minimum cost. Single small firms in small rural communities are monopolies.Arguably patents, market size and geography are all pertinent to disability goods andservices. Technical advances in accessibility goods such as hearing and seeing aids,wheelchairs and computer programs often have patents associated with them.Furthermore, even when there are no patents, the size of the markets are small relative tothe lowest-cost-production technique because of the relatively small number of peoplewith the specific needs addressed by specific products. Finally, even when there is adegree of homogeneity in a market, there may be monopoly if geographical distancebetween the consumer and supplier is important and the person with the disability lives ina small distant community. For some products, each of the three issues may be present –e.g. a patented electric wheelchair with person-specific modifications owned by a personin a rural town.It is widely accepted that where markets are not contested, the price premium over themarginal cost of production will be greater the less elastic the demand for the good orservice. As a corollary, the inefficiency will be greater the fewer the availability ofsubstitutes and substitution possibilities. For many disability goods and services, demandis highly inelastic because there are few substitutes to the highly specific functional needprovided by the good or service. Often the alternative to having the good is to not have itat all.The lack of substitution possibilities contrasts with many everyday monopoly goods andservices, where the alternative is some other product or service, or some other way ofhaving the service provided. Thus, a postal company may enjoy a monopoly in thedelivery mail, but Email, phone/fax, couriers, or personal delivery are alternatives thatmake the demand for mail elastic.The fewness of close substitutes follows partly from the high degree of heterogeneousnature of impairments. Given highly specialised modifications and adaptations oftenrequired to accommodate specific impairment characteristics, each final product is almostunique in the supply of a servicing characteristic. Products which may be substitutes for26
some people will not be substitutes for others – e.g. a hand-powered wheelchair will notbe substitute for an electronically-powered wheelchair to a person without hand-powerbut it will be for a person with hand-power.All this suggests that the degree of inefficiency will be higher in non-contestabledisability markets, and that the size of the price premium over marginal cost will begreater in such monopolies than for other monopolies.The higher cost of living due to monopoly and limited contestability is pertinent in anumber of respects. Firstly, it compounds the income disadvantage faced by people withdisabilities, thereby reducing the real income or purchasing power of the already limitednominal income of people with disabilities. This is not directly relevant to the DDA but itis directly relevant for the Productivity Commission, and to income support policies thatseek to reduce poverty. It is relevant to the Productivity Commission’s understanding ofthe inefficiency of disability goods and services markets, and for recommendations itmay make for products that serve that market. It is also relevant for poverty-alleviationpolicy since it suggests that people with disability are more materially disadvantaged thannominal income statistics imply.It is also relevant to the DDA insofar as it is important to recognise that policies thatreduce the additional cost of living of people with disability are to some extent offsets toinefficiencies in product markets. As outlined above, offsetting the additional cost ofliving due to disability is one component of the measurement of the benefits of the DDA.27
Page 3: • it will take a long-time for th
Page 6 and 7: While activity-restriction and disa
Page 8 and 9: deviations away from the average. W
Page 10 and 11: individuals will trade to an effici
Page 12 and 13: Poverty caused by a lack of endowme
Page 14 and 15: The traditional economics approach
Page 16 and 17: o treats production and consumption
Page 18 and 19: • without a reliable accessible t
Page 20 and 21: such as above, the time cost is arb
Page 22 and 23: should be seen as one critical elem
Page 24 and 25: modifications and adaptations will
Page 28 and 29: Unjustifiable HardshipUnjustifiable
Page 30 and 31: While a narrow short-term liquid ca
Page 32 and 33: From an analytical economics perspe
Page 34 and 35: Inefficiency of Enforcement through
Page 36 and 37: • respondents are likely to have
Page 38 and 39: that when there is improvement, the

Notes to Submission to the Productivity Commission Inquiry into the ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?