CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences (Prague, Czech Republic)
In October 2016 Ukraine stopped permanent price control policy for essential goods. Instead, the government has started a temporary 90 days policy for basic goods. It means that any time authority can provide any types of price control policy no longer than 90 days per year. “Any time” is when the economy and society will need government interaction to market pricing in order to control prices. “Any types” of policy means that authority can implement fixed (frozen) prices which is the strictest type of the policy as well as control of producers’ declarations for pricing, which is the least controlled type of the policy. As that the new policy has been just started, there is no much possibility to analyse its consequences. However, this study proposes to analyse permanent price control policy, which has been implemented till 2016 in Ukraine. Because of the absence of the possibility to analyse the new policy, our strategy is based on two points: the first one is to understand needless of price control policy and the second one is to verify the efficiency of provided permanent PCP. It will give understanding whether there were reasons against permanent price control policy as well as the experience of implementing temporal price control policy. In order to understand the needless of permanent price control policy, we proposed to understand the stage of transition of the Ukrainian economy. Based on the difference in abilities of price to reflect quality in the market and planned economies, we used it as a tool for covering research question. Moreover, the quality of the product was decomposed into intrinsic and extrinsic attributes, what allows providing more analysis that is accurate. Therefore, based on the results from the hedonic regression, Ukrainian consumption market is characterized by significantly positive intrinsic price effect and significant brand awareness price effect. Literature evidence suggests that such price abilities are inherent to free markets. Only significant country of origin price effect displays features of the planned economy. The conclusion is that the Ukrainian economy is on its last stages of transition to market economy. Therefore, consumer market is able to reallocate resources efficiently and satisfies the need of all consumers. As result, in the current stage of transition of the Ukrainian economy, there is no need in permanent price control policy. Obtained results demonstrated that the last price control policy was inefficient. Using hedonic pricing regression, we showed that the product from price-controlled market has greater prices than its alternative from the free market. Therefore, it underlines the negative overlooked effect from provided PCP.
Keywords: price control policy (PCP), efficient and inefficient PCP, transition market, market of essential goods, temporary and permanent PCP.
JEL Classification: L11, L15, L51, L66.
Cite as: Kolomiiets, U. (2018). Ukrainian price control policy. Marketing and Management of Innovations, 2, 292-312. https://doi.org/10.21272/mmi.2018.2-23
This work is licensed under a Creative Commons Attribution 4.0 International License
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