Abstract
The aim of this study is to analyze the price setting in the South African coffin industry which is affected by the HIV/AIDS pandemic. Consumer behavior and decision
making, producer and retailer response, as well as the overall effects that this industry may have within the realm of the South African economy is analyzed. The central focus however, is the price determination governing the supply and demand relationship, and the influence that this relationship has on the market mechanism, which is important in
regulating the functioning of the South Africa coffin industry.
Chapter One introduces the problem statement by highlighting the purpose of the study
in light of the effects of HIV/AIDS. The link between the coffin industry and the
economy is the increase in mortality rates caused by HIV/AIDS. Sub-Sahara is the
worst affected global region, and within South Africa over four million people have
been affected by the pandemic.
The effects on the economy can be observed on several fronts for example, the
weakening of South Africa’s social structure, increasing costs to the state by putting pressure on the limited medical facilities and other social institutions, reducing the skill base, reducing national economic growth rates, etc.
Due to the high levels of unemployment experienced in South Africa, several problems
become relevant, especially in rural areas. Such problems can be highlighted in terms
of an increase in the financial burden placed on those paying for burials. This is also extended to those organizations supplying financial aid to help cover the costs, such as societies and funeral policies. Due to the low levels of income experienced by many in urban centers, this puts a great deal of pressure on government to assist in the burial of those whom are not in a position to afford the funeral costs. Due to the upward pressure
on demand for coffins, prices for coffins may increase, which will be transferred onto
the rural population, which characteristically experience a greater degree of low incomes, putting additional financial pressure on these people. The increased rate of burials increase the demand on limited burial space, causing costs to rise, putting additional pressure on household savings. This becomes increasingly important, as the
levels of household savings in South Africa are relatively low.
Chapter Two focuses on the theoretical aspects of price determination. Price setting
behavior is not only a method of profit maximization, but is also an extension of
marketing strategies used to generate and establish a larger share of any target market.
This chapter is based on a literary survey and applies a theoretical approach to price
determination, analyzing and comparing market structures. Pricing strategies, nominal and real price rigidities and modern pricing methodologies under the influence of
Internet and global markets are explored.
Chapter Three takes a close anthropological review of traditional South African
cultures and religions, and illustrates how these traditional beliefs and religions
influence the decision making of the consumer and the undertaker. Within the context of these cultural perspectives, the issue of cremation as an alternative to the burial is explored. An analysis of the consumer demand is achieved by using the data collected for the consumer and the undertaker surveys. The costs and the consumer decision making regarding burial practices and the financing thereof is highlighted. Burial policies and funeral societies are discussed, and the overall effect that they have on consumer spending patterns, the misallocation of resources as well as the negative tradeoff effects of this misallocation has on the employer, the household, the government and the overall economy.
The financing of funerals is also an important issue as the high rates of unemployment and the huge social demands that it places on consumers are forcing the majority to search for funding from other sectors of the economy that already feels the strain of a global slowdown. Economically, this chapter challenges the traditional customs and the redirection of scarce resources that are been greatly misallocated into inappropriate
sectors.
Chapter Four investigates the influence of HIV/AIDS on the economy, and the
influence that HIV/AIDS has on the South African coffin industry. This chapter
highlights the spread of the HIV/AIDS virus and the influence that this virus has on
society. The role woman play in the South African economy, and the effect of
HIV/AIDS on the labor force. The discussion then focuses on HIV/AIDS and the
workings of the coffin industry and the near perfectly competitive market structure that
functions within the South African coffin industry. Pricing strategies highlighting the
role of religion, HIV/AIDS and income are considered and the role of the undertaker in
society. The research was predominantly based on the information generated in the
undertaker and the consumer surveys as well as a literary survey.
However, the undertaker does not operate independently. There are many related
industries, which are discussed, and the relationship between them is highlighted. The
growth of the complementary industries, similarly, must not be underestimated, as the
coffin industry provides them with a springboard from which they may enter the
market.
Chapter Five constructs a model to show how the influence of HIV/AIDS affects the
price setting behavior of coffins. Thereafter, the model introduces the concept of competition, showing how the growing rate of competition, in conjunction with
HIV/AIDS, is a more suitable model in determining the influence on price setting
behavior. The model is based on the Ordinary Leased Squared (OLS) method, and the
model is tested on economic a priori, Statistical evaluation and econometric tests, for example, Autocorrelation, Heteroscedasticity and Multicollinearity.
Using Theils Inequality Coefficient, the model is proven sound for forecasting
purposes. The combination of HIV/AIDS and competition using the SIC and AIC test
proves that this combination is a better-forecast model than if HIV/AIDS was used as a
determinant on its own.
In chapter Six, the construction, distribution and analysis of the Consumer and the Undertaker surveys are discussed. For the purpose of the study, it became obvious that within the South African coffin industry, there is a gap between available literature on the industry and what was required for the compellation of this research. A detailed discussion on the methodology, purpose, the target sample, limitations and format of the surveys is discussed.
The data collected proved very useful on two fronts: Firstly it provided detailed
information that was required in order to complete the study. Secondly, the data
collected introduced new questions and opened new doors to further investigation. The data provided sufficient information to show the relationship between the economy and
the coffin industry.
In chapter Seven, the main findings of the study are highlighted by the overwhelming
influence of HIV/AIDS which has affected both the nature of the market, as well as
price setting behavior. However, it has led to a large degree to the misallocation of
resources, that are required in other spheres of the economy. The motivation behind
funeral policies is an area of concern, and requires additional research into the social
and economic influence of such structures.
The influence of the rapid growth of competition has a large role to play in the coffin industry. Furthermore, the traditional beliefs of the consumer need to be protected and the role of the undertaker in this regard is a major concern. The final chapter highlights areas of further research, makes note of shortcomings in the available literature and highlights the role of policy makers with respect to the South African coffin industry.