Unique geographical features always breed market advantages to the firms that operate in that area, as consumers' choice are limited and their willingness to spend would be increased. In economic term, we call it as price inelastic.
Recently, I went to a place called Look Out Point with my family to celebrate my sister's birthday. Basically, it is a place on a hill in Ampang Jaya that offer skyline views of KL city. There are 4 restaurants located there - Look Out Point, Gasoline, Panorama, and Haven. We changed our dining place from Look Out Point to Gasoline after found something wrong with the first one.
Why? Because the foods are charged unreasonably high. We were only given one piece of menu called "Christmas & New Year Special Menu". First page shows the foods while another page shows the beverages. The cheapest one which is the Chicken Chop costs RM27.80 while the most expensive Lobster Salad cost RM148!
Of course this restaurant got some source of monopoly power. Surprisingly, quite a number of customers were actually dining there. Even the online survey shows that it is the most visited resturant in that small area (30.1%). The use of a product by a person can affect the value of that product to other people. In economics, we call it as "network effect". There is a direct relationship between the proportion of people using a product and the demand for that product. In other words the more people who are using a product the higher the probability of any individual starting to use the product. This effect accounts for fads and fashion trends.
Recently, I went to a place called Look Out Point with my family to celebrate my sister's birthday. Basically, it is a place on a hill in Ampang Jaya that offer skyline views of KL city. There are 4 restaurants located there - Look Out Point, Gasoline, Panorama, and Haven. We changed our dining place from Look Out Point to Gasoline after found something wrong with the first one.
Why? Because the foods are charged unreasonably high. We were only given one piece of menu called "Christmas & New Year Special Menu". First page shows the foods while another page shows the beverages. The cheapest one which is the Chicken Chop costs RM27.80 while the most expensive Lobster Salad cost RM148!
Of course this restaurant got some source of monopoly power. Surprisingly, quite a number of customers were actually dining there. Even the online survey shows that it is the most visited resturant in that small area (30.1%). The use of a product by a person can affect the value of that product to other people. In economics, we call it as "network effect". There is a direct relationship between the proportion of people using a product and the demand for that product. In other words the more people who are using a product the higher the probability of any individual starting to use the product. This effect accounts for fads and fashion trends.Moreover, this restaurant is using seasonal factor (Christmas and New Year celebration) to execute its special menu, earning excessive profits. In business world, indeed, it is nothing wrong with this kind of strategy but as a rational consumer, I would never go to this restaurant in future.
The restaurant's Indian owner may end up praising himself by making this "brilliant" decision.
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