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Chemists at risk as prices are slashed: Big
The cuts came after the Community Pharmacy Action Group, representing small retailers, withdrew its opposition to a High Court action brought by the Office of Fair Trading. There are 13,500 pharmacies in Britain, of which 9,000 are small shops serving local high streets and rural communities.
The action group chairman, David Sharpe, said that the outcome would be a devastating blow. ‘Many pharmacists will simply not be able to survive given the
John Vickers, Director-General of Fair Trading, said: ‘This is excellent news for consumers, who will now benefit from lower and more competitive prices for common household medicines. Consumers will save many millions of pounds a year.’ The Proprietary Association of Great Britain, which represents medicine and food supplement manufacturers, said it was disappointed.
Questions:
a. What kind of market structure is involved for the sale of medicines and vitamins in the above case? What can be said about barriers to entry in this market?
b. Explain the disadvantages to the small pharmacies and your conclusion regarding long run equilibrium for these pharmacies?
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