U Croatia Last week, the Law on Extraordinary Price Control Measures was adopted, which, among other things, prescribes greater price transparency and prescribes a limit on the prices of key products and services of each trader. Is it possible to adopt such a law in Serbia for "Vreme", economist Ivan Nikolić explains that it is obvious that consumers they still respond to high prices without reserve, which is why no one will be deprived of profit if they can make it, because there is no reason to do so.
Nikolić says that, if such regulations in Croatia really produce results in practice, he sees no reason why they should not be applied in Serbia as well, and notes that the entire region follows good practices.
He emphasizes that there is always a problem with transparency and display of prices in the context of comparison with the previous period, which is also one of the provisions of the law adopted in Croatia, "because there are various manipulations and the question is whether this is the right answer to high prices".
The price cap on key products has a downside
When it comes to the prescribed limitation of the prices of key products and services in Croatia, Nikolić says that this applies to several dozen items, but he also points out that such limitation is very characteristic.
He indicates that the price of an item is limited, for example chocolate of 100 grams, for which a limited price is determined, but neither the brand nor the quality nor the composition of the chocolates are prescribed, but only that the chocolate of 100 grams must have a certain limited price, and that the retail chain must have at least one item with that price and weight in its offer.
"When it is regulated in this way, there is still a huge space for the trade to satisfy such a request, but at the expense of the consumer, because that 100 gram chocolate can be made from cocoa or something else." Then the question arises as to what can be bought at a limited price, while other prices will remain as they were. It doesn't have to be the right way to fight against high prices," says Nikolić.
A surge in demand leads to a surge in prices.
He indicates that the high prices in Croatia are the result of a sudden jump in demand that is difficult to explain.
"Real salary growth in Croatia last year was almost 11 percent, which is really huge." This must be expressed in the uncontrollable increase in prices, including food products. The basic law of economics is that when prices jump above, let's call it an 'acceptable' level, they usually return, if there is harmony between supply and demand. In the case of a discrepancy, when the demand is significantly higher than the supply, as is clearly the case in Croatia, but it seems to me also in the entire region, when the growth of disposable income is faster compared to the supply, then there is a disruption of price increases that is greater than expected," says Nikolić.
No monopolistic behavior
He does not think that there is monopolistic behavior among retail chains in Croatia and Serbia, because the offer is "relatively really rich".
"The situation in retail is incomparably better than it was ten or twenty years ago. There are a large number of trade chains, and the situation is not like it used to be, when there was only one trade chain," says Nikolić.
In response to the remark that the public has the impression that retail trade chains, following the example of mobile phone operators, mutually agreed on price levels and thus made competition meaningless, Nikolić says that this has never been proven.
"If it exists, and it was only talked about, it is a phenomenon that the Commission for the Protection of Competition should fight. No such commission that exists in every country of the region has so far come out with a precise calculation or analysis of such phenomena, and especially not with any punishment for a retail chain that has such a practice. We can only speculate about that, but I am not sure that the problem is only in retail, because there are also wholesalers, distributors and manufacturers," says Nikolić.
When there is less money, prices will be lower
He states that it is symptomatic that the entire region has been affected by the phenomenon of high prices.
"The main tool, something that will definitely defeat that phenomenon, is the fundamental matching of aggregate demand with supply." When we are more limited with what we have available to buy goods, prices will adjust accordingly. it is obvious that consumers still respond to high prices without any reservations, that is, they are ready to buy products with high prices, without any hesitation. In such circumstances, traders, and especially producers, do not worry. "Nobody will deprive themselves of profit if they can make it, there is no reason for them to do that," concludes Nikolić.
