consumer surplus

I talked about how differentiation can lift the market average price level up as more of consumer surplus will be replaced to be supplier surplus. This implies one phenomenon that once a company is able to access more information about its clients, more consumer surplus will be taken by the supply side. Under such circumstance, the demand side will not have any complaints about this phenomenon, as all the consumers are willing to pay the prices for their preferred products. Such process of occupying the consumer surplus will continue as products will be more differentiated and specialised.

Is there any factor that can improve the consumer surplus nowadays? There are actually several factors; however, to be honest, these factors are generally weak. Firstly, the better communication can help consumers to form some form of union to gain some market power to fight against the supply side. Secondly, consumers now have better information, so they are less likely to be exploited by the supply side. Thirdly, better communication between the supply side and the demand side may change the relationship between the supply side and the demand side. Some small companies can gain consumers by establishing a good relationship with their clients. The consumers can gain more gains beyond the utility of the product but also other things, for example, better services and friendship with the company. Fourthly, location does not matter so much, nowadays people can shop from almost all around the world; therefore, they are possible to get cheaper prices from overseas.

Overall, these factors may help consumers to regain some of their surpluses but they are relatively weak and the price will continue to rise due to the market differentiation.