In the UK, supermarket is one of the most of import issues in British ‘ lives since about everything is bought in it. Harmonizing to Baidu ( 2009, a ) , the term of supermarket was first exist in 1930, and spread rapidly. Goods in a supermarket are cheaper than normal shops since stocks are purchase in big sum with low monetary values, and the self-help shopping constructs saves the money of store helpers ( Baidu, 2009, a ) . This essay ‘s purposes are to calculate out whether supermarket in the UK is an oligopoly market, what strategies supermarkets are used to vie with each other, and whether these schemes benefit consumers.
Several economic footings need specifying. First, harmonizing to Anderton ( 2008: 322 ) , an oligopoly is a market with come ining barriers and merely a few accountants who act interdependent. He besides suggested that “ collusion means oligopolist do understanding among themselves to curtail competition and maximise their ain net income ” ( Anderton, 2008: 323 ) . Harmonizing to Baidu ( 2009, B ) , monetary value war is to cut down the monetary value in order to increase market portion. Predatory pricing means that a movie sacrifices its short tally net income to drive away other movies in order to win the long tally net income ( Baidu, 2008 ) . Furthermore, short tally is a period which at least one factor can non change, while every mill can alter in the long tally ( Anderton, 2008: 266 ) . Market failure exists when the allotment of resources is inefficient ( Anderton, 2008: 92 ) .
Supermarket market in the UK is an oligopoly. First of all, see Figure 1 ( BBC, 2005 ) , there are 5 chief supermarkets in this market-Tesco, Asda, Sainsbury, Morrisons and Safeway, command 86.8 % market portions. What is more, the supermarkets ever “ monitor each other ‘s behaviour ” and respond with new schemes ( Anderton, 2008 ) . Finally, the capital to get down a supermarket is big, which prevents new rivals come ining the market. Therefore, supermarket market in the UK matches the features of an oligopoly.
First, collusion is the chief schemes the UK supermarkets used to do money. The five chief supermarkets together keep the monetary value much higher than the cost. Therefore, consumers need to pay more money. Furthermore, since there are barriers to entry the market, there is seldom other pick for consumers and this market failure can non be corrected by the market. What is more, some supermarkets even collude with manufacturers to maintain the monetary value in a high degree. Timesonline ( 2007 ) reported that in 2003 the top five British supermarkets “ were accused of conspiring with the dairy processors to repair the monetary value and resulted in a & A ; lb ; 270 million cost to Britain ‘s shoppers. ”
Despite conspiring together, a supermarket in the UK besides uses monetary value war to enlarge its ain market portion. For illustration, there was a monetary value war among supermarkets in the beginning of 2009 ( Chinajilin, 2009 ) . Therefore, consumers can buy goods with lower monetary values. However, monetary values are frequently still higher than costs for the company to gain money. What is more, a bulk of monetary value war is merely focus on several goods. As a consequence, what consumers can profit is really limited. Furthermore, some consumers merely be attracted by the lower monetary value and buy some gratuitous things. They will besides devour some non-discount goods at the same clip. Therefore, consumer is non ever a victor in a monetary value war.
Furthermore, marauding pricing is besides a really powerful scheme. While a big supermarket entry a new topographic point, it will take down monetary values to where under costs, in order to drive away other little supermarkets and grocers. Therefore, consumers can profit a batch with this lower monetary value in the short tally. However, while merely a few or even no little houses left in the market, the incomer will raise the monetary value once more, most clip even higher than earlier. As a consequence, in the long tally, the loss of consumers is much larger than they obtain in the short tally.
Furthermore, non-price competition is every bit of import as schemes above in supermarket market in the UK. Firstly, some supermarkets have expanded their merchandises and even provided serves, such as high engineering goods and fiscal helping ( Tutor2U, 2007 ) . As a consequence, consumers can buy about everything they need and desire in one supermarket and can salvage clip. Second, there are besides some other non-price schemes, which can profit consumers in convenience. For case, place bringing system, expanded gap hours ( some full twenty-four hours opening ) , and cyberspace shopping ( Tutor2U, 2007 )
In decision, supermarket market in the UK is an oligopoly, with four chief schemes to vie whit each other-collusion, monetary value war, predatory pricing, and non monetary value competition. Collusion is the largest factor which harm consumers ‘ right and involvement since monetary values are fixed extremely. Price war can profit consumers with a certain extent ; nevertheless, what supermarkets obtain is still larger than consumers. Furthermore, consumers can profit from marauding monetary value in the short tally, while the loss in the long tally is far larger. Finally, consumers can obtain clip and convenient from non-price competition, hence, this scheme is the best 1 for them. In general, consumers lose money but receive convenience and clip, in other words, they use money to buy non merely goods, but besides convenience and clip.
Equally far as I am concerned, the UK authorities demands to step in in this market and rectify the market failure. They can make several things, such as formulate anti-monopoly or anti-oligopoly policies, astrict the size of oligopolists and forestall excessively high monetary values. Consumers besides need to protect their ain rights, for illustration, seek aid organize the consumer council. As consumers, we all hope that our right and involvement can be protected.
Anderton, A. ( 2008 ) . Economic ( 5th Edition ) . Harlow: Pearson Education
BBC ( 2005 ) [ Online ] Is Tesco excessively large? Available at: hypertext transfer protocol: //news.bbc.co.uk/2/hi/business/4422065.stm ( Accessed 29th January 2010 )
Baidu ( 2008 ) [ Online ] Predatory pricing Available at: hypertext transfer protocol: //baike.baidu.com/view/316773.htm? fromenter=Predatory % 20pricing ( Accessed 25th February 2010 )
Baidu ( 2009, a ) [ Online ] Supermarket Available at: hypertext transfer protocol: //baike.baidu.com/view/36098.htm? fr=ala0_1 ( Accessed 25th February 2010 )
Baidu ( 2009, B ) [ Online ] Price war Available at: hypertext transfer protocol: //baike.baidu.com/view/1164535.htm ( Accessed 25th February 2010 )
Chinajilin, ( 2009 ) [ Online ] Supermarkets in the UK bigan a monetary value war Available at: hypertext transfer protocol: //www.chinajilin.com.cn/content/2009-01/05/content_1458758.htm ( Accessed 29th January 2010 )
Timesonline ( 2007 ) [ Online ] UK supermarkets accused of price-fixing Available at: hypertext transfer protocol: //business.timesonline.co.uk/tol/business/industry_sectors/retailing/article2495097.ece ( Accessed 25th February 2010 )
Tutor2U ( 2007 ) [ Online ] Monopoly-Oligopoly Available at: hypertext transfer protocol: //tutor2u.net/economics/content/topics/monopoly/oligopoly_notes.htm ( Accessed 29th January 2010 )