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Australia Likely Has The Market Structure Of An Oligopoly

462 Words2 Pages

Stage 2 Economics
Question One
The supermarket industry of Australia likely has the market structure of an oligopoly. It has many of the characteristics of an oligopoly. It has a few firms that supply most of the market, a high degree of product differentiation, significant barriers to entry and significant control over price.
Few firms that supply most of the market
There are four major supermarket chains in Australia – Woolworths, Coles, Aldi and IGA which each have a large share of market sales. There is competition from other supermarkets but they are relatively insignificant. Because there are only a few firms which dominate the market, the firms are interdependent. Firms closely monitor each other as competitive strategies and …show more content…

One of these is economies of scale.
Significant control over price d tried to
Kinked demand curve
The demand curve of an oligopoly is kinked at market price as shown in the diagram. There were price wars
Question Two
Anti-competitive behavior
Predatory pricing: It is when goods or services are sold at a price so low that other firms in the market in the market are forced to leave because they cannot compete with the price. This is usually done by companies with large market share and it is illegal because the firms are misusing their market power with the purpose of forcing a competing firm out of the market. Firms are not allowed to sell their products below the cost of supply.
Exclusive dealing: It is when “one person trading with another imposes some restrictions on the others freedom to choose with whom, in what or where they deal”. It is illegal for consumers to be restricted in the ability to buy a good.
Resale Price maintenance: It is when suppliers “put pressure on businesses to charge their recommended retail price to charge”. They may threaten to withdraw supply if they don’t sell the good at the price the supplier

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