Question

According to an exclusive report by KPMG, a world-renowned accounting organization, apps like WeChat and Alipay in China, and Grab in Malaysia are what we termed as ‘super apps’. These apps usually bundle together online messaging (similar to WhatsApp), social media (similar to Facebook), online shopping (like Shopee), e-wallet (like Touch ‘n Go eWallet), and services (like Uber). These super apps are designed with one thing in mind—to monopolize users’ time so that there is no need for them to use a variety of apps.

a)How does the monopoly of super apps result in the transfers of income? (5 markah/marks)

b) Discuss how the big data obtained by these super apps can be used to collect all consumer surplus for themselves. (5 markah/marks)

c) Is super app can be considered as a price maker? (5 markah/marks)

d) In lieu of (c), will a super app always charge the highest possible price at all times? (5 markah/marks)

e) “Being a super app guarantees economic profits.” Discuss whether this is a valid statement. (5 markah/marks)

f) What are some ways that existing super apps may attempt to prevent rivals from entering into the market? Discuss an example. (5 markah/marks)

g) How does super app compare with single-purpose apps in terms of price, output, and efficiency?

My sir gave me this question. but there is no references. please do answer.

Answer 1

THE CASE DISCUSS ABOUT SUPER APPS ORIGINATED FROM CHINA THAT ENSURES BUNDLING OF VARIOUS TYPES OF APP AND FACILITY UNDER ONE SINGLE APP.THIS WILL SURELY HELP PEOPLE SAVING THEIR TIME AND MAKES CONSUMPTION CONCISE.

a) UNDER THESE SUPER APPS, VARIOUS SERVICES LIKE MESSENGER, FOOD, SERVICE, E-WALLET, ETC SERVICES ARE AVAILABLE. WHEN SOMEONE IS ORDERING FOOD, HE PAYS TO THE SUPER APP AND THAT PAYMENT GET DISTRIBUTED AMONG ALL APPS IN CERTAIN PERCENTAGES. IN THIS CASE INCOME GETS TRANFERED FROM ONE INDIVIDUAL TO ANOTHER IN EXCHANGE OF GOODS AND SERVICES.

b) SINCE THE SUPER APPS HAVE MONOPOLY, IT CAN CHARGE ANY PRICE AND THAT MAY BE TOO HIGH THAT CONSUMER EITHER CONSUMES IT OR GO WITHOUT THE COMMODITY. IN THAT CASE THE ENTIRE CONSUMER SURPLUS WILL BE OBTAINED BY SUPER APPS.

c) SINCE SUPER APPS ASSEMBLES ALL APS AND HOLDS MONOPOLY IN SUCH APP THUS IT CAN BE PRICE MAKER.

d) IF THERE EXIST SUBSTITUTE OF THOSE SERVICES, SUPER APPS CAN NO CHARGE HIGH PRICES. IN THAT CASE CONSUMER MAY MOVE TO SUBSTITUTE. ALSO IF THE SERVICES ARE AVAILABLE OFFLINE THEN ALSO IT CAN NOT CHARGE HIGH PRICE. OTHERWISE IF IT HOLDS PURE MONOPOLY, IT WILL ALWAYS CHARGE HIGH PRICE.

e) YES IT ENSURES PROFIT OVER AND ABOVE REVENUE. BECAUSE IN CASE OF ONLINE SHOPPING NO CHANCE OF BERGAINING EXIST AND SO THE PRICES ARE ALWAYS CHARGED INCLUDING COST.

f) IN ORDER TO PREVENT RIVALS FROM ENTERING THE MARKET, EXISTING SUPER APPS CAN MAKE A PRICE FLOOR SO THAT ENTERING FIRM WILL NOT FIND IT PROFITABLE SELLING AT SUCH A LOW PRICE AND WILL NOT ENTER THE MARKET.

FOR EXAMPLE A MARKET WITH 5 SELLERS IS SELLING TOYS. COT OF TOYS IS $10 AND ARE SOLD AT $11 NOW A NEW SELLER WANT TO ENTER THE MARKET. THE PREVAILING SELLERS OF THE MARKET MAY SET PRICE AT $10 SO THAT NEW FIRM MAY NOT FIND IT PROFITABLE TO ENTER THE MARKET. IN THIS WAY ENTRY OF RIVAL FIRM ARE PREVENTED.

g) UNDER SUPER APPS ONE CONSUMER CAN BUY ANY SERVICE BY PAYING SAME CHARGE AND MAY SAVE TIME IN SEARCHING FOR THE SERVICES. BUT IN SINGLE PURPOSE APPS CONSUMER IS AVAILABLE WITH ONE SERVICE AT THE CHARGE AND HE HAS TO INVEST MUCH TIME TO GET ALL THE SERVICES. THUS SUPER APPS ARE MUCH MIRE EFFICIENT, TIME SAVING AND COST SAVING AS WELL.