Tacit Oligopoly of the Original Supermarkets of Bogor

Topics: Hypermarket, Supermarket, Marketing Pages: 22 (5533 words) Published: August 27, 2013
Extended Essay in Economics

Tacit Oligopoly of the Original Supermarkets of Bogor

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IB Diploma Candidate #:
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The grocery market of Bogor has been facing a significant change during the past several years. Sudden emergence of new suppliers has more than doubled the number of existing supermarkets. I took interest at the fact that despite of the sudden increase in the number of suppliers, there never was a price decrease. This signifies that the market is experiencing Over Supply.

I decided to investigate whether the strain caused by the over supply have changed a particular part of the market structure of the supermarkets of Bogor. I took a keen interest at whether the original supermarkets of Bogor form a tacit oligopoly to compete against new competitors.

My first step was to investigate whether the supermarkets shows characteristics of an oligopoly. Several factors are apparent; the number of firms in the market is small, their size is relatively big, their products are slightly differentiated, and the entry barriers are high. To further strengthen my claim concerning the barrier, I have studied a small portion of two legal documents that concerns starting a supermarket business. Afterwards, I have recorded product prices and performed statistical analysis to determine whether the price range is narrow. I then compare the prices of the new supermarkets and all the supermarkets of Bogor as a whole.

The result shows that indeed there is an oligopoly; yet it extends to reach the new supermarkets. This means that the original supermarkets have not segregated themselves to attempt gain business power (e.g. in pricing). New questions are formed based on the results. Among them is whether the oligopoly intentional or has competition with other suppliers, e.g. the traditional markets, caused the price range to be limited? These questions require further researches that are likely to orientate to the Business Studies disciplines.

Word Count: 295

Table of Contents

Abstract 1

Table of Contents 2

Part 1: An Introduction to the Essay3

Part 2: The Present Market Profile5

Part 3: Review of Relevant Theories7

Part 4: Hypothesis and Methodology of Research 10

Part 5: Data Collection and Analysis 12

Part 6: Conclusion and Evaluation 17

Bibliography 18

Appendix 1____ 19

Appendix 2 20

Appendix 3 21

Acknowledgements 22

Part 1:

An Introduction to the Essay

Bogor is a minor city that is founded over two centuries ago, thus by now it is well known by its surrounding cities and villages. The city was established as a center of trade for local agricultural industries (Encarta). As a citizen of the city ever since birth, I know well that the grocery market of the city is massive. The vast and well known open air market of fresh produces called Pasar Bogor (or ‘the Market of Bogor’), numerous minor grocers, five notable supermarkets, and the easily accessible shopping centers in Jakarta have supplied the household demands of the 3,696,848 citizens residing in Bogor (the figure was recorded at a 1997 census) (Encarta). The market status, however, have taken a significant turn during the last 10 years. Numerous new suppliers entered the market; among them are as much as five new supermarkets (doubling the present number), two hypermarkets, and two new mini-market chains. Among the very basic principles taught to economics students is the Market Equilibrium law. It states that the demand and supply of a product is dependent of the price level. The consumers...

Bibliography: 1). "Bogor." Microsoft® Student 2006 [CD]. Redmond, WA: Microsoft Corporation, 2005.
3). Glanville, Alan. Economics from a Global Perspective. Oxford: Glanville Books, 2003.
7). Urban, Paul, et al. Mathematics for the International Student: Mathematics HL (Core). Adelaide: Haese & Harris Publications, 2004.
I would like to credit:
Santo Gultom, as my Extended Essay supervisor, Economics teacher, and IB Coordinator (2007-2008).
Kale Hanson, as my IB Coordinator (2006-2007).
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