Oligopoly in the uk supermarket industry

Why are Supermarkets becoming more competitive? If the cost of implementation is greater than the pay-off, clearly it will be rejected. Another key feature of oligopolistic markets is that firms may attempt to collude, rather than compete. Therefore demand will only increase by a small amount.

Raising price or lowering price could lead to a beneficial pay-off, but both strategies can lead to losses, which could be potentially disastrous.

Further examples Banking The Herfindahl — Hirschman Index H-H Index This is an alternative method of measuring concentration and for tracking changes in the level of concentration following mergers. Cartel-like behaviour reduces competition and can lead to higher prices and reduced output.

The battle for market share in UK supermarkets

Oligopoly is the most common market structure How firms compete in oligopoly There are different possible ways that firms in oligopoly will compete and behave this will depend upon: However, if firms collude, they can agree to restrict industry supply to Q2, and increase the price to P2.

Oligopolies tend to be both allocatively and productively inefficient. Even when there is a large rise in marginal cost, price tends to stick close to its original, given the high price elasticity of demand for any price rise.

It has been suggested that cost-plus pricing is common because a precise calculation of marginal cost and marginal revenue is difficult for many oligopolists. Non-Price Competition Oligopolies tend to compete on terms other than price. In a monopoly, there are no competitors to be concerned about.

For example, OPEC is a cartel seeking to control the price of oil. In order to compete, new entrants will have to match, or exceed, this level of spending in order to compete in the future. This is why on the kinked demand curve model the lower segment of the demand curve is inelastic.

This superior knowledge can deter entrants into the market. If a market has significant economies of scale that have already been exploited by the incumbents, new entrants are deterred.

On a personal note, I used to only get these from Tesco, now they all seem to do it.

The supermarket sector

Certainly, the growing strength of discount giants like Aldi and Lidl have really shaken up the market and diluted the cosy oligopoly previous enjoyed by the likes of Tesco and Sainsbury. Interdependence The distinctive feature of an oligopoly is interdependence.

Superior knowledge An incumbent may, over time, have built up a superior level of knowledge of the market, its customers, and its production costs. But, there is an incentive for firms to exceed quota and increase output. How expensive is it to introduce the strategy?

As with other deliberate barriers, regulators, like the Competition and Markets Authority CMAmay prevent this because it is likely to reduce competition.Supermarkets, for example - There is Netto, Aldi, Lidl and so on, but the market is still dominated, as is shown by how much of the market share the big four have.

Likewise, in video gaming consoles - There was the NGear and Dreamcast, but they don't mean it isn't an oligopoly. The supermarket industry in the UK -Oligopoly Market. The leading supermarkets in the UK commonly are known as the ‘big 4’, Tesco, Sainsbury, Asda and Morrisons.

(oppapers, n.d) It is not doubt that the UK supermarket industry is an oligopoly market because the industry fits the characteristics of the oligopoly. Revision:Oligopolies in supermarkets essay The main factor in an oligopoly is that there are only a few major competitors in the market.

What are some current examples of oligopolies?

This is obvious in the UK supermarket industry, as there are three main companies (Tesco, Sainsbury's and Asda), although there are many smaller companies in the market. When there is a high concentration ratio in an industry, economists tend to identify the industry as an oligopoly.

Example of a hypothetical concentration ratio The following are the annual sales, in £m, of the six firms in a hypothetical market.

The UK definition of an oligopoly is a five-firm concentration ratio of more than 50% (this means the five biggest firms have more than 50% of the total market share) The above industry (UK petrol) is an example of an oligopoly.

Oligopoly - Collusion. Levels: A Level; Exam boards are only a small number of firms in the industry and there are significant barriers to prevent new firms entering the industry; Market demand is not The exposure of illegal price-fixing by market regulators such as the European Union Competition Commission and the UK's .

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Oligopoly in the uk supermarket industry
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