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The egg Industry, OPEC, Antitrust Law, and the Consumer

This solution discusses the "Incredible Edible Egg" website at http://www.aeb.org/. Though an advertisement for the egg industry, this proved useful on investigating how competition plays in the egg industry.

The solution mentions the OPEC Oil Cartel, the organization's stated goals, the member-countries, and when it was founded. Their role in keeping oil prices high, and the difficulties they faced in keeping the cartel united.

A comprehensive look at the Antitrust Enforcement was also looked into. An exhaustive list of the antitrust cases before 1895 to present was also provided enforcement.

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Competition
The official "Incredible Edible Egg" Web Site: Go to: http://www.aeb.org/. This website is sponsored by the American Egg Board. Among other things, the site is clearly an advertisement for the egg industry. Have you ever seen or do you expect to see advertising for individual egg producers? What characteristics of the good make the market competitive?

Answer:
Yes. One is found in http://www.wholesomebabyfood.com/egg_nog_for_baby.htm- . This advertisement is about the benefit of mixing milk with edible egg.
Another is found in http://www.crackingeggs.co.uk/teachers/ks2-egg-advertisements.ph. Many other advertisements on eggs are found on the net. This is a proof that the egg market is not yet a monopoly in the industry.

We will still expect individual egg producers to advertise in the different media-- internet, print, broadcast, and television. But this will be costly if not by individual egg producers. An advertisement run by a cooperative/collusive [like the incredible egg website] seems a better alternative since its member-producers would just contribute a small amount to finance the website-- a fraction of what they will spend had it done in an individual site.

Consider the following as your additional/supplemental reading:
It's not easy being an advertiser. Consumers are being bombarded with ads wherever they turn, and creating an ad that actually stands out from the multi-colored slew of the others involves hefty investments in bu sinesses that only specialize in creating ad campaigns. Even then, success is not a given. How, then, can a product generate enough interest to help the company remain profitable? Contrasting from most commercials on television, the advertisement for the incredible edible egg steers clear of any brand reference -- a welcomed change for some, perhaps, but looking past the fifteen seconds that air on TV, the absence of brand is not as significant as it claims to be. In fact, its purpose is as profit-oriented as any other product being advertised on TV.
(www.lagrange.edu/fyi/CarlsPaper.pdf , accessed March 18, 2011)

What characteristics of the good make the market competitive?

Answer:
Aside from advertising egg with the following characteristics: highest quality protein, versatility and variety, low food cost, delicious and nutritious meal, the egg industry as advertised in the internet site http://www.aeb.org/ gains the excellent leverage vis-a-vis other individual egg advertisers.

Oligopoly

The OPEC Oil Cartel Go to www.opec.org. What are the organization's stated goals, which countries are members, and when was it founded? Is it normal for them to be successful in keeping oil prices high, or have they faced difficulties in keeping the cartel united in the past?

What are the organization's stated goals, which countries are members, and when was it founded?

Answer:
In accordance with its Statute, the mission of the Organization of the Petroleum Exporting Countries (OPEC) is to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.
The OPEC is composed of twelve (12) countries namely, Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela.

The Organization of the Petroleum Exporting Countries (OPEC) was founded at the Baghdad Conference on September 10-14, 1960.

Is it normal for them to be successful in keeping oil prices high, or have they faced difficulties in keeping the cartel united in the past?

Answer:
The OPEC was somewhat successful and oftentimes encounters difficulties in keepping oil price high. Bear in the mind the following events to support this assertion:
The 1980s oil glut was a serious surplus of crude oil caused by falling demand following the 1970s Energy Crisis. The world price of oil, which had peaked in 1980 at over US$35 per barrel ($93 per barrel today), fell in 1986 from $27 to below $10 ($54 to $20 today). The glut began in the early 1980s as a result of slowed economic activity in industrial countries (due to the crises of the 1970s, especially in 1973 and 1979) and the energy conservation spurred by high fuel prices. The inflation adjusted real 2004 dollar value of oil fell from an average of $78.2 in 1981 to an average of $26.8 per barrel in 1986. (1980s Oil glut, http://en.wikipedia.org/wiki/1980s_oil_glut, accessed March 18, 2011)

OPEC is a swing producer and its decisions have had considerable influence on international oil prices. For example, in the 1973 energy crisis OPEC refused to ship oil to ...

Solution Summary

This solution discusses the competition in the egg industry, and the rationale of the founding of the Oil Petroleum Exporting Countries (OPEC).
A good source for the students listed here is a complete Antitrust cases from 1895 to present.

There are Internet links useful to the students that were incorporated here.

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