Fixing retail prices for essential commodities like chicken and eggs might seem like a straightforward solution to ensure affordability for all consumers. However, in Bangladesh such measures often fall short due to various economic and structural challenges. Understanding the underlying microeconomic principles and market dynamics is essential to grasp why price controls may be ineffective at the national level.

Microeconomics focuses on the supply and demand within individual markets. In a competitive market, the equilibrium price is determined where the supply and demand curves intersect. When a price is fixed below the equilibrium, it can lead to persistent shortages. For basic necessities like chicken and eggs, which are crucial to daily diets, the demand curve tends to be relatively inelastic -- people need them regardless of price fluctuations.

In Bangladesh, the retail price of chicken and eggs often encounters significant pressure due to high demand and constrained supply. The cost of production, which includes feed, labour, and transportation, influences supply. When prices are fixed, it can disrupt the delicate balance between supply and demand, especially when the fixed price does not cover production costs.

Bangladesh's market for chicken and eggs is characterised by high demand due to population growth and dietary preferences. According to recent data, the per capita consumption of eggs in Bangladesh is about 136 per year while chicken consumption is around 1.5 kilogramme. The rapid growth in demand can outpace supply, exacerbating the effects of price controls.

For instance, a report from the Bangladesh Bureau of Statistics indicated that egg production in the country has struggled to keep pace with the increasing demand. Additionally, poultry farmers face challenges such as fluctuating feed prices and disease outbreaks. When the government imposes a fixed price lower than the cost of production, it can lead to a situation where farmers are unable to cover their costs, leading to reduced production and exacerbating supply shortages.

The Competition Act of 2012 in Bangladesh aims to promote fair competition and prevent anti-competitive practices. The act provides mechanisms to address market abuses such as price fixing by syndicates or cartels. Instead of implementing fixed prices, enforcing this act can be a more effective way to address price manipulation.

The Competition Commission of Bangladesh has the authority to scrutinise market practices and enforce penalties, thereby fostering a more competitive market. This approach can help address the root causes of price inflation rather than imposing ineffective price ceilings.

The Trading Corporation of Bangladesh (TCB) is a government agency that can play a pivotal role in regulating the market indirectly. By directly participating in the market, the TCB can offer essential commodities like eggs at competitive prices, creating pressure on private sellers to adjust their prices. This not only helps stabilise prices, but also provides consumers with access to fair market rates.

For example, if TCB sells eggs at a reasonable price, it can act as a benchmark for private sellers. Moreover, TCB's involvement can increase market transparency and enhance supply chain efficiency, reducing the overall market price indirectly.

Fixing the retail price of chicken and eggs at a national level is fraught with challenges due to the fundamental principles of microeconomics, market dynamics, and structural issues. Instead of imposing fixed prices, leveraging the Competition Act to combat anti-competitive practices and utilising the TCB to create market pressure offer a more sustainable solution. By addressing these issues through these alternative approaches, it is possible to foster a more balanced and efficient market for essential commodities.

The author is a competition regulations expert