ya true.. Keeping a price floor to farmers I understand. But why for these companies.
But TRC should focus on giving more facilities to the public. not to the companies.
because mobile telecommunication sector can easily go in to a price war due to the fact that number of player in the industry are higher than market requirements. experts feared this to happen once air tel entered the market as they influenced other companies to cut there prices.
as you can see every one in the mobile telecommunication industry is providing a very identical service.. so they don't have a way to differentiate there business from each others.. result is they try to increase there profitability by getting more subscribers from competitors and the easiest way to do so is by cutting prices..
one can gain more subscribers by reducing prices if other players remain unchanged.. but it doesn't happen.. once other companies start to do the same thing its called a price war..
price war after a certain level can ruin the entire industry as it forces its players to operate below there cost margins.. in other words they will have to operate under losses in order to survive in short run.. but in the long run companies that dont have the financial backing will exist the industry leaving only one or two big players..
Final out come is customers getting a high priced low quality service due to the monopoly created by the price war..it has so many other losses if you look from different perspectives (government, shareholder etc..)
