A Perfect Competition

The Fresh Fish Market - A Perfect Competition

Fresh fish, it is something that we're accustomed to here in Malaysia. Fish in Malaysia is one of our staples for protein, either cooked in our favourite sweet and sour sauce, steamed with ginger and oyster sauce or made into otak-otak, it is something that always seems to be around when we think of food.

However, if you look at it from an economic point of view, the fresh fish market is one of the oldest perfect competitions in our country. It is not only a market, but also a tradition and a lifestyle for many fishermen who have had the skills for catching fish passed down for generations.

Being in a perfect competition, there is a very large amount of fishmongers in Malaysia, and all of them are selling the same thing, fish .

The fresh fish market is a very open market, as long as you have fish to sell, you're set. All you have to do is rent a stall at a local market and you can start your business. However, pricing is important when you're selling fresh fish. However, sellers must conform to the market price as they are price takers and  have no market power, so if you overcharge for your fish, you'll probably run out of business very soon.

The supply of fish is not something you tend to worry about, after all, the sea is always there, so there will always be fish, right? Well, when you really think about it, many factors can affect the supply in the fresh fish market. For example, the weather. During the heavy rain season in Malaysia, fish supply is heavily reduced, as fishermen cannot go out to sea to catch the fish. At that point, the demand would surpass the supply, and the price of fish would increase. This will result in a shortage of fish in Malaysia.

Another example is Chinese New Year. This year during the festivities, the supply of fresh fish was drastically reduced at wet markets in the cities and as the majority of Chinese wholesalers were on their Chinese New Year Holiday. Tenggiri fish were being sold between RM26 and RM27 per kilogram , Sardines between RM5-RM9, Tuna fish between RM6-RM7 and prawns between RM19-RM26 per kg depending on size. These prices are RM1-RM1.50 above their market equilibrium prices, but people still bought them.

The laws of demand and supply dictates that when prices increase, demand will decrease. But in this case, demand did not decrease. This is because, being a festive season, this was a special case. During Chinese New Year, Chinese families have family dinners and banquets where fish is usually served, and during that time of celebration, they omitted the increment in the prices for fish. This goes to show that many factors are able to influence a perfect competition and we can't just follow the generic rules of demand and supply when  we analyze the market.

Producers in the fresh fish market earn normal profit. At this point, the fresh fish sellers are putting all their resources to the best use, working at full efficiency.  The overall goal of the fishmongers is to maximize their economic profit while minimizing their costs.