The UK supermarket case
In this essay I plan to focus on the current state of the UK supermarket industry and the conditions that are in place. Through this I will analyse the market structure and discuss the levels of concentration along with the current barriers to entry and exit present in the supermarket sector. Following this I will discuss the case of the Safeway acquisition enquiry that occurred in 2003. This will look at the UK competition commissions view at the time and focus on who benefited from this acquisition.
It is clear that in the UK supermarket industry there are a few main players each taking a very large percentage of the market share. This leads to the market being dominated by a small number of firms. In the case of …show more content…
In an oligopoly firms put a lot of effort into providing different goods to their competitors. As a result of this firms benefit from a now downwards sloping demand curve in which they become a price maker. In the short run producing large profits in the short run. Firms attempt to make their product different through horizontal and vertical differentiation. In terms of the supermarket industry horizontal differentiation comes into place when deciding the location of supermarkets. Consumers may differentiate products due to their personal travel time to buy the product. If the travel costs are too high this may hinder a consumer’s decision. Vertical differentiation depends upon the quality of the product whereby a consumer’s income determines which products they consume (Brian Atkinson, …show more content…
“Game theory analyses the way that two or more players or parties choose actions or strategies that jointly affect each participant “ (Nordhaus, 1998). A game is made of three components whatever the context; a set of players, a set of choices and a set of rules. Regarding oligopoly’s, the firms act as players and the choices are made on outputs and prices set by the firms (Rodger Perman, 1999). The main rule in the market is the number of firms along with legal regulations in place in an oligopolistic market. To summarise, Players in the supermarket industry use this game to gain the greatest payoff and in turn they set prices in the market (Michael Parkin,
In this essay I plan to focus on the current state of the UK supermarket industry and the conditions that are in place. Through this I will analyse the market structure and discuss the levels of concentration along with the current barriers to entry and exit present in the supermarket sector. Following this I will discuss the case of the Safeway acquisition enquiry that occurred in 2003. This will look at the UK competition commissions view at the time and focus on who benefited from this acquisition.
It is clear that in the UK supermarket industry there are a few main players each taking a very large percentage of the market share. This leads to the market being dominated by a small number of firms. In the case of …show more content…
In an oligopoly firms put a lot of effort into providing different goods to their competitors. As a result of this firms benefit from a now downwards sloping demand curve in which they become a price maker. In the short run producing large profits in the short run. Firms attempt to make their product different through horizontal and vertical differentiation. In terms of the supermarket industry horizontal differentiation comes into place when deciding the location of supermarkets. Consumers may differentiate products due to their personal travel time to buy the product. If the travel costs are too high this may hinder a consumer’s decision. Vertical differentiation depends upon the quality of the product whereby a consumer’s income determines which products they consume (Brian Atkinson, …show more content…
“Game theory analyses the way that two or more players or parties choose actions or strategies that jointly affect each participant “ (Nordhaus, 1998). A game is made of three components whatever the context; a set of players, a set of choices and a set of rules. Regarding oligopoly’s, the firms act as players and the choices are made on outputs and prices set by the firms (Rodger Perman, 1999). The main rule in the market is the number of firms along with legal regulations in place in an oligopolistic market. To summarise, Players in the supermarket industry use this game to gain the greatest payoff and in turn they set prices in the market (Michael Parkin,