Economic Analysis of Sainsburys

Topics: Monopoly, Marketing, Competition Pages: 2 (391 words) Published: September 6, 2010
To achieve an oligopolistic market structure there are certain characteristics which must be achieved. A small number of firms would dominate the market, each of these firms has a significant market power and would closely follow the behaviour of the other companies in the market. Unlike in a monopolistic market structure, the products produced by the firms of the oligopoly market do have substitutes. Firms will use non price competition methods in order to make their product or service stand out from the other, these may include mass media advertising, loyalty cards, home delivery, expanded opening times (24hrs) internet shopping, special offers and superior customer service.

If a firm were to increase their price higher than OP demand could become very elastic, the oligopolistic may fear that a rise in price may not be followed by their competitors, therefore their higher price may lose them a share of the market If a firm was to lower their price lower than OP demand could become very inelastic, the risk on this occasions is that they may increase sales but if the competitor not only matches their new selling price but that they may have a lower selling price undercutting them, therefore losing sales but also losing the oligopoly firm a share of the market.

Monopoly is a market structure where there is one firm that has complete control over the market for a product or service because it is the sole supplier. To be a monopoly there are certain condition that have to be achieved. You must be the sole supplier of a good/service therefore considerable market power over price being set and amount of the product being produced; there is no substitute for this item. Monopolies are usually in industries that are very hard to break into; this may be for various reasons. Patents registered to these products, high start up costs, Government Tariffs and Quotas and industries protected by law (Post Office) would all make it very difficult for a new company to gain...
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