"It is possible that the relatively steep rise in the prices of a number of dairy products is the result of the lifting of the supervision of prices - in the absence of a significant increase in competition in the sector. It can be seen that the prices of products that remained under supervision, such as milk and sour cream, increased by a lesser rate than that of prices not under supervision."
With that, a recent study by the Knesset Research and Information Center confirmed what observant consumers probably figured out on their own.
The research report was submitted to the chairman of the Knesset Economic Affairs Committee, MK Carmel Shama-Hacohen (Likud ), in preparation for today's committee session on whether price supervision should be restored for basic dairy products.
According to Shama-Hacohen, the report suggests there is "no weighty reason not to reduce the price of basic dairy products, including cottage cheese, by restoring supervision."
Researchers Eliezer Schwartz and Tamir Agmon tracked the prices of a number of dairy products between 2005 and 2011. During that period, price supervision was removed on some of the items, while others remained under government supervision.
Schwartz and Agmon determined that during the period prior to the lifting of supervision, the changes in dairy prices were comparable with those in Europe, and the overall prices were lower (in terms of consumer purchasing power ) than in Europe. After supervision was removed, the increase in prices of these items exceeded the Consumer Price Index in Israel.
"The imposition of price supervision for dairy products is not necessarily the most effective way to guarantee prices, in comparison to other methods such as reforms to heighten competition," the report noted. "Consideration could be given to examining the adaptation of supervisory instruments for various products and sectors (electricity, public transportation, food products and the like )."
The researchers note that, in most cases, the items under price supervision are those made under cartel or monopoly condition, with the supervision intended to balance the lack of competition in a particular sector - even when the market has not been officially declared a monopoly.
"In Israel there are dozens of products under price supervision, mainly food products," write Schwartz and Agmon, who go on to detail the ministries and agencies involved in monitoring and setting these prices. They also point out that the prices are raised or lowered in accordance with global commodity prices and the profitability of the manufacturer.
While noting the value of price supervision, the researchers add a note of caution: "Price supervision can lead to one of the following undesirable situations: The setting of too low a price leads to a decline in supply, negatively affects the service given to customers and even creates a black market." Setting too high a price, in comparison to manufacturing costs, "can lead to a reduction in the well-being of customers." Did somebody say "Duh"?
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