The Oligopoly Of The Supermarket In Uk Economics Essay

Harmonizing to the WOVRE web site ( 2010 ) , even though there are many smaller companies in the UK supermarket industry, it still has three chief companies in the UK ( ASDA, SAINSBURY and TESCO ) . So there are a few big rivals in the UK market selling the similar things at a similar monetary value, the smaller companies can non come in the oligopoly market because the entry barriers is reasonably high. All in all, UK supermarket industry could be defined as an oligopoly market. Based on Anderton ( 2006, P: 367 ) , foremost, since it is high barriers to entry the market, there are merely a few company in an oligopoly market. Second, the company in the market has to be mutualist, for case, any of normal company will non increase their monetary value entirely, and concerns merely decrease the monetary value when others lower it. “ The larger supermarkets will therefore be able to bear down somewhat lower monetary values than the smaller 1s, as they will hold lower operating expense costs. ” ( WOVRE, 2010 ) . Even though the monetary value is traveling to do by the larger company, the others company still follow it, because of these company need to acquire the monopoly net incomes together. As it shown in the figure, the market monetary value above P is elastic, so if one house rise it monetary value to the intercept of bluish and xanthous line, it will leads to the lessening of the entire gross. Obviously, other companies in the oligopoly market will non follow this house ‘s behaviour. The market monetary value below P is inelastic, that means if one house bead its monetary value, other companies in the oligopoly market will be forced to follow this house ‘s behaviour. ( Anderton ( 2006 ) Phosphorus: 367 )

Third, “ Likely to be important entry barriers into the market in the long runA which allows houses to do supranormal net incomes. ” ( Tutor 2u, 2010 ) Probably, these houses make the monetary value together so there is non really possible to alter the monetary value by the company outside the oligopoly market, therefore these houses can do the monetary value every bit higher as they want so gain the supranormal net incomes during the long tally. Forth, harmonizing to Anderton ( 2006, P: 367 ) , all of the merchandises in the supermarket are the same with others even though they have their ain merchandise which is non a good distinction. In my sentiment, they are tonss of disadvantages of oligopoly for the consumers but still a small benefit.

It is difficult to state oligopoly is good or non for the consumers. To get down with, oligopoly will take to consumers purchase things non in a just monetary value. That is one of the disadvantages. Because of supermarkets have conspired the monetary value really expensive without some grounds but do a merchandise bash non worth this monetary value. Next, since that they do non hold any competition, so the supermarket will non see quality as an of import ground to promote them to vie. That means consumers pay for the money but purchasing the inexpensive things. In add-on, consumers can non take the merchandises base on the monetary value, so they merely can make up one’s mind which to purchase on other conditions, for case, the personal VIP cards, service after selling, etc. That will do the picks become lesser for the consumers. But the disadvantages for the consumers are which the benefits are for the oligopoly. For all the market, oligopoly “ tends to be inefficient in the allotment of resources ” and “ promotes the concentration, and therefore inequality, of income and wealth. “ ( Amos web, 2010 ) . This shows that oligopoly can non administer the resources in an efficient manner. An oligopoly puting a higher monetary value but bring forthing the merchandises even worse compared with perfect competition. Besides, even though the oligopoly can gain more money to repair their statues, even if do them to determinate a higher purpose, this is bad for the market. It is non easy to command any more, authorities ‘s ordinance will be failed in one twenty-four hours.

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However, everything has good sides and bad sides. One of the benefits for the consumers is the monetary value of the merchandises will be invariably. For the ground that the supermarkets have to be mutualist, so they will non alter the monetary value quickly. The benefit for the market is “ by developing merchandise inventions ” ( Amos web, 2010 ) An oligopoly has to contrive some new merchandises to pull the sight of the consumers, otherwise the purchaser will fed up with the colluding monetary value and no longer purchase the older merchandises.

To sum up, to determinate oligopoly is good or non depends on the grade of the oligopoly. The best status for the consumers is that most of the supermarkets set up a sensible monetary value whatever it is high or low, the point is the merchandises worth this monetary value. And the company can deflect their concentration on the monetary value that they can utilize more clip to believe about how to pull more consumers in other ways. Like maintain the supermarket gap for 24 hours, or better services after selling, childs services or advanced installations. These all are the ways to pull the clients without monetary value war, and besides this is the manner to hold oligopoly market, because both concern and consumers can profit from these ways. Hence, a perfect monetary value competition is the best for the consumers but non a oligopoly market.