Market Structure of Australia †Myassignmenthelp.com

Question: Discuss about the Market Structure of Australia. Answer: Introduction There is the presence of different types of market structure in the Australian economy. The important structure that dominates is the oligopoly form of the structure. In an oligopoly type of market there are mainly a handful number of firms who are dominating the market. Duopoly is a special form of oligopoly. The Australian retain supermarket is dominated by the duopoly. The duopoly firms who control the market of retail are Woolworths and Coles. The competition that is faced by the firm imperfect and both produces homogenous products. The interest tends to vary with respect to two types of variables for the firm. In first case, the price set by the firms and the quantity that is produced by each of the firms. A huge share is controlled by the firms in the market for a particular type of product (Baumol, and Blinder 2015). Among all the forms of the market, there is less number of firms who are monopolistic. The characteristic of monopolistic market structure is that there are a lar ge number of buyers and sellers of the product. In this particular essay, recent newspaper articles are used for the analysis of the duopoly market of Australias supermarket industry. Duopoly Super Market Industry: When there are only two types of firms holding the market then it represents a duopoly market. The features of oligopoly are similar to that duopoly structure. In the article by the Sydney Morning Herald, there has been a reviewing of the law of demand and the supply of Coles, the dominant firm in the Australian super market. There are large number of consumer power concentrated in the hands of the Coles and Woolworths. These giant super markets they are facing a tough competition from the low cost large firms of the overseas i.e. Aldi from Germany and Costco from the United States. The expansion is getting rapid than never before. This provides the hint that the super market of Australia is getting competitive which is a very beneficial factor for the customers but the seasoned sellers Coles and Woolworths have to suffer (Moulin 2014). In the prior years the retail giants have been able to keep the prices in control through the use of the buying power for putting pressure on the sup pliers to a point which is quite a difficult task.The pressure has resulted in the demand for the home brands. The retailers they take into account the integration of the production, product and the point of sales. There has been a price rise by the suppliers but now this is quite a concern. The spotlight emerged when there was complaint lodged in the Federal Court of Australia by the Australian Competition and Consumer Commission (ACCC). The complaint noted was that Coles was engaging in the unconscionable conduct and there are suppliers who still demand for their demand from Coles. Coles have however defended the allegations saying that they are not aware of the complaints. The reason for the suppliers to criticize is that they are in a fear of losing their shelf space with the market of retails getting more competitive (Financial Review 2016). Thus, it has been seen that the retail super market industry is losing the duopoly structure with the presence of large number of foreign supermarket firms who tends to offer products at a much lower price than that of Coles and Woolworths. In an article under Australian Financial Review, it was stated that Food Revolution Group has partnered with Coles and Woolworths, the largest of all the super market for the sale of juices. This will be a great initiative for it since it has entered into the Australia Stock Exchange. The reason for the US firm to enter into agreement with Coles and Woolworths was due to its dominating position in the market. It is expected that there will be more of fruit juices in the shelves of the Australian Supermarket. The owner of the company is also too excited with the initiative as this was a very good venture and there would be large outlets that would help in promoting their sales. Food Revolution Group has collaborated in China and there are more than 1000 stores in the China selling their product (The Sydney Morning Herald. 2014).Thus, the companys position in the market is relevant for making collaborations and partnerships. Theory: There are two types of interest of duopoly firms has in the market, the price that is set by each of the firm and through the quantity produced. There are a number of assumptions on which both the models Cournot and Betrand are based and the most important of which is that they are needed to sell homogenous products (Varian 2014). When there is price interest involved then it is shown through Cournot Model. In a Cournot Model, the two firms (Coles and Woolworths) they assume that the output of each are fixed and this is decided independently of each other but at the same time (Boland 2014). The decisions are made by the firm by taking the behavior of the firm as constant. Cournot equilibrium is likely to result from the number of responses together by all the firms (Nicholson and Snyder 2014). Betrand Model is a model helps firms to compete involving quantity rather than price (Hall and Lieberman 2012). The model is a game of two types of firms where each of the firm is going to assu me that the other will not be changing the prices in response to the price cut. The firms use this logic to reach Nash Equilibrium. Conclusion: Thus, the Australian supermarket, which is characterized by a duopoly structure, is seen to break down due to the increasing competition in the market due to the entry of new firms in the market. In the face of competition, it is getting quite difficult for the firms to adopt appropriate strategy. Coles and Woolworths they are trying to collaborate with some of the global brands so that they both are mutually benefited. Since the market is characterized by duopoly, so there is a competition among the firms with respect to price or quantity. Coles and Woolworths in a fear of losing large market share trying to alter their marketing strategies. References: Baumol, W.J. and Blinder, A.S., 2015.Microeconomics: Principles and policy. Cengage Learning. Boland, L.A., 2014.Methodology for a New Microeconomics (Routledge Revivals): The Critical Foundations. Routledge. Financial Review. (2016).Food Revolution Group juices Coles and Woolies for a new deal. [online] Available at: https://www.afr.com/business/fresh-squeeze-on-the-asx-courted-by-coles-and-woolworths-20160404-gny23g [Accessed 8 Aug. 2016] Hall, R.E. and Lieberman, M., 2012.Microeconomics: Principles and applications. Cengage Learning. Moulin, H., 2014.Cooperative microeconomics: a game-theoretic introduction. Princeton University Press. Nicholson, W. and Snyder, C.M., 2014.Intermediate microeconomics and its application. Nelson Education. The Sydney Morning Herald. (2014).Coles: Reviewing law of supply and demands. [online] Available at: https://www.smh.com.au/comment/smh-editorial/coles-reviewing-law-of-supply-and-demands-20140506-zr5k1.html [Accessed 8 Aug. 2016] Varian, H.R., 2014.Intermediate Microeconomics: A Modern Approach: Ninth International Student Edition. WW Norton Company.