Sunday, January 23, 2005

Valentines day more expensive?

The BBC report that Interflora, the UK mutual for delivering flowers, has agreed to a buy out by 3i. Story. Will prices now rise? A recent study suggests that privatisation does encourage firms to concentrate on profit-maximisation.

The effect of UK building society conversion on pricing behaviour

This paper says that UK building societies (similar to a cross between S&Ls and credit unions) acted to boost profits after they were privatised. This was one of the many arguments against privatistion at the time. The Nationwide, which refrained from privatisation and maintains its mutual status, has tried to emphasise the fact that its borrowing rates are lower and deposit rates are higher than the regular banks. It also emphasises the fact that benefits accrue to members.

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