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An oligopolistic industry has a number of features many of which are illustrated in the UK supermarket industry. These include:
• high concentration ratio – An oligopolistic market is one where supply is dominated by a small number of large firms each of whom has significant market power. The UK grocery market is highly concentrated with TESCO, Sainsbury, ASDA and Morrison’s having a combined market share in excess of 60%
• high barriers to entry – In the grocery market large firms have been ccused of buying up land in and around towns to prevent competitors using this land to open stores. This process is known as land banking. Other examples include below cost selling
• interdependence – Supermarkets are interdependent in the fact that action by one supermarket is likely to provoke a reaction by another. If one supermarket begins selling alcohol at a loss others are likely to follow suit
• ability to earn supernormal profits – The supermarkets are able to earn supernormal profits. In 2009 TESCO reported a pre-tax profit of £3.13 bn, up 10% on the previous year. (It should be noted, however, that TESCO earns a significant proportion of its profits from non-grocery sales.)
• potential for collusion – UK supermarkets have faced charges of price-fixing in a range of products from milk to petrol.
queen babito answered the question on July 9, 2018 at 11:48
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