Imperfect Competition and Externalities
New Zealand businesses and their competition.
a. TSB bank
TSB Bank is a financial institution that offers various financial services such as everyday banking, savings, investments, home loans, insurance and foreign exchange. The banking industry in New Zealand operates in a relatively stable environment. However, the industry is still struggling with financial crisis that is characterized by high debts and slow economic growth. TSB bank’s main competitors are the five leading banks in New Zealand that include ASB Bank, Kiwibank, ANZ New Zealand, Westpac and BNZ. There is also competition from small financial institutions. TSB bank New Zealand operates in a monopolistic competition whereby …show more content…
In such a situation, consumers would buy fewer goods than they would in a perfect competition where no one can influence market prices and there is free market entry and exit. Imperfect competition reduced customer satisfaction creating a lot of inefficiencies. Imperfect competition is not allocatively efficient because resources are not used to produce goods that meet consumer preferences. Since producers maintain so much market power, they will produce fewer products and sell them at higher prices than their marginal costs (Callander, …show more content…
For instance, the government intervenes through encouragement, assistance, disincentives and stultification. Government intervention in research and development can influence technological progress and industrial performance. For instance, the government of New Zealand provides funds and grants to facilitate most of the research and development in New Zealand. Encouraging innovation and development has led to new products and services and more efficient methods of production in the economy (Dalziel, & Lattimore,