Before determining whether Australian retail grocery market is “perfectly competitive”, a sound understanding of the term should be in place. According to Hubbard et al. (2013), a perfectly competitive market is one that “meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products and (3) no barriers to new firms entering the market”. According to Keith (2012), Australia is one of the most concentrated in the supermarket retail sector in the world. In this case, the two supermarket chains Coles and Woolworths account for about 80% of the packaged groceries sold in Australia (Smith, 2006). The retail grocery market is dominated by these two giants, which eventually creates a duopoly/oligopoly existence, making the whole market not at all “perfectly competitive”. There are many buyers, but there are not too many sellers! Taking a look at the retail market, it is easy to notice that Coles and Woolworths have a lot of different brand extensions. For example, credit cards, liquor, insurance, etc. They even have affiliation with Shell and Caltex respectively, that a customer will get 8 cent discount per litre of
References: Australian Competition Law. (2010). Competition. Retrieved February 28, 2013, from http://www.australiancompetitionlaw.org/glossary/competition.html Díez-Vial, I Economics Online. (n.d.). Growth, mergers and acquisitions. Retrieved march 1, 2013, from http://www.economicsonline.co.uk/Business_economics/Growth_mergers_and_acquisitions.html Hubbard et al Jones, E. (2006, April). The Australian retail duopoly as contrary to the public interest. Retrieved March 1, 2013, from http://sydney.edu.au/arts/political_economy/downloads/JonesRetailDuopoly&PublicInterest406.pdf Keith, S Kruger, C. (2012, November 2). Biggest winner of price wars: supermarkets. Retrieved March 3, 2013, from http://www.theage.com.au/business/biggest-winner-of-price-wars-supermarkets-20121102-28olq.html OECD Smith, R. L. (2004). The Australian Grocery Industry. The Australian Economic Review , 304-310.