Benefits Of The Oligopoly Market Structure Economics Essay

In the UK supermarket industry, supplies are concentrated in a few houses. The gross net incomes of the major UK multiples remain healthy as a consequence, with the Big Four – Tesco, Sainsbury, Asda and Safeway – roll uping gross revenues of ?45.55bn last twelvemonth ( news.bbc, 1999 ) . In oligopoly market is that the market merely portion by a few houses. They besides compete with each other ( Anderton, p322, 2008 ) . In the other words, an oligopoly market is a few companies have a big rate of supply in one industry. Harmonizing to Anderton ( 2008 p322 ) ‘oligopoly is arguably the most of import of the theories of the house ‘ . Three major features can acknowledge the oligopoly market. The first 1 is a few houses own a big rate of supply ( Anderton, p322, 2008 ) . That is means in one industry ; the market is shared by a few companies. Asda, Iceland, Marks & A ; Spencer, Tesco are ain the big portion of the market. ( tutor2u,2010 ) Furthermore, in oligopoly houses are mutualist ( Anderton, p322, 2008 ) . In other word, each company is paying attending with the action of the rivals. Because the figure of the rivals is less, the activity of one house would do a great attempt to the other companies. The concluding feature of oligopoly is because of the barriers, the new house is difficult to entry ( Anderton, p322, 2008 ) . More companies in one industry mean more rivals. More rivals portion the market means each company have lesser net income. After these features, consumers would purchase the supply in a relatively lower monetary value. Furthermore consumers would be promised the quality of the green goods. However, because of fewer rivals, the monetary value is decided by these companies. Consumers would non hold a truly low price.Consumers would bask a relatively lower monetary value and be promised the quality of the green goods after the state of affairs oligopolistic market construction create. In oligopoly few houses compete with each other ( Anderton, p322, 2008 ) . At the same clip, they would non alter the monetary value at one house ‘s pleasance. Company are interdependent is one of the oligopolistic market construction ( Anderton p330, 2008 ) . If one house has some activities, other houses would come up some thoughts to forestall the consumers non been travel off. In Christmas one supermarket has the activity of read frosting the monetary value and other supermarket would hold similar activities to pull the consumers ( R. Geoff, 2010 ) . Harmonizing to the Anderton ( p330, 2008 ) , ‘changing monetary value is a really hazardous scheme for one house ‘ . For the kinked demand remedy, at first this few houses have to do certain the monetary value non excessively high to pull the clients ; or excessively low to assure the house would hold net incomes. The most of import one is it ‘s easy to do the onslaughts by other houses. That is called monetary value stableness in economic. At the beginning of one green goods is released, every house would hold different monetary value. However the monetary value would be balance at the terminal. Because there are the same monetary value in each house, consumer could non afraid purchase the green goods in a high monetary value.

Furthermore in oligopoly a few houses own a big rate of supply. In UK, Tesco, Sainsbury, Asda and Safeway ‘s roll uping gross revenues of ?45.55bn last twelvemonth ( news.bbc, 2010 ) . Alistair Darling pledged 20 billion lbs ( US $ 30 billion ) of revenue enhancement cuts ( D. Svenja, 2010 ) . These four supermarkets earned one over Forths of the money which Alistair Darling pledged. The supply concertinaed in a few houses ; it is easy for the authorities to look into the merchandise indiscriminately. In order to protect their trade name, supermarket would assure the quality of the merchandise. Consumers would non worry about the quality. However consumers have lesser chose.

The new companies are barely to entry the industry. The barriers are strong for the new companies to entry ( Anderton, p322, 2008 ) . The oligopolistic houses have strong financess. The monetary value of the large company merchandise besides is low. Large company earns the net income in long tally. If the new company set the same monetary value as them, is barely to keep the cost of rent and pay. The competition is non intense. Large supermarket has a big sum of fund to do the service net income. While consumer enjoy the net income services by the large supermarket

In brief, supermarket industry is oligopoly market. Because in oligopoly a few companies own a big sum of supply, consumers would bask a relatively lower monetary value and net income survives and be promised the quality of the green goods after the state of affairs oligopolistic market construction create. However, because the barriers is strong for new company to entry, they have lose choose to purchase the green goods.