Introduction
Agioi Anargyroi is a little suburb of Athens near Menidi which is the 2nd largest municipality of Greece in footings of country. During the 1970 ‘s, the 1980 ‘s and until the late 1990 ‘s Agioi Anargyroi was an country with a comfortable market as due to its location and its developed market attracted the involvement of consumers from countries nearby such as Petroupoli, Liosia and Menidi.
Since 1999 the market of Agioi Anargyroi faces a diminution chiefly due to the fact that other countries located nearby Agioi Anargyroi have developed markets pulling clients from Agioi Anargyroi and the fact that a batch of stores selling Chinese merchandises of highly low monetary values have opened in the country doing the shutting of a batch of stores ( due to Chinese competition ) . Additionally, an temblor in 1999 provoked serious amendss in the substructure of the country and the stores every bit good. This state of affairs affected the image of the market and accordingly it became less attractive.
Until late a batch of underwear stores ( about 10 ) composed the market for underwear in Agioi Anargyroi but due to the grounds mentioned above the market is presently consisted of two stores. The little figure of stores dwelling the market made me believe that a conniving oligopoly might take topographic point as store proprietors could hold hypothesized that it would be more profitable for them to conspire than to vie. This idea led me to organize my research inquiry and I hypothesized that the stores had formed a conniving oligopoly.
The construction of this essay will be as follows: Initially an drawn-out analysis of the methodological analysis used will be provided and will be followed by the hypothesis stated clearly. Afterwards, the theoretical portion which follows will supply the theoretical footing of the Market Structures related to the survey. Finally, informations will be collected and processed and the result will either turn out or confute the original hypothesis supplying us with a decision of the survey.
Methodology
In order to analyze the cogency of the antecedently stated hypothesis we will utilize the method of interviews by questioning clients of these stores and dwellers of this country in general. First of wholly, a list of 20 merchandises will be created. These merchandises ( ten from each store ) are to be of specific classs: Women ‘s bandeaus, underpants, nighties, pajama, singlets and trunkss. Work force ‘s pugilist trunkss, undershorts and pajama.
First, every ( working ) twenty-four hours of 13 hebdomads the monetary values of the merchandises are to be recorded so that they can be compared. If the stores charge the same monetary values so we will hold an indicant that our theory might be true and the stores collide. In fact our survey is traveling to be really accurate in footings of analyzing the degree of competition between these stores as from the 1st until the 15th of August and from the 1st until the 15th of October the stores in this country are obliged to drop their monetary values so that the consumers will hold the opportunity to purchase merchandises cheaper, this period is like a price reduction period. That period is when ( in competitory markets ) houses try to pull consumers by puting lower monetary values than their rivals, so during that period a batch of utile decisions can be made in footings of the market construction.
Another feature of an oligopolistic market is that the merchandises are considered homogenous. I will analyze whether some merchandises ( specifically, the 1s on the list formed above ) are considered by the consumers as homogenous. These merchandises are selected based on the monetary value that is proposed to be charged by the industries and the demands that they satisfy. So merchandises that satisfy the same demand ( i.e. dark clothingi? pyjama ) and are of the same ( or about the same ) proposed monetary value are selected and a questionnaire is formed by inquiries comparing the points in a manner that helps us conclude whether the merchandises are considered by clients as homogenous or non.
Hypothesis
The hypothesis is that the market construction of underwear in Agioi Anargyroi is oligopoly taking under consideration that:
There are merely two stores that sell underwear in the country
The merchandises that are sold may ( ab initio ) be considered as homogenous
I think that the theory may be valid as it would be profitable for the stores to conspire and by taking advantage of their economic systems of graduated table, to deter the creative activity of new stores in the country. By making so they would do certain that they have full control of the market and portion possible net incomes.
So, the hypothesis is that the stores have colluded in order to keep their portions of the market and cut down the possibility of the add-on of new stores in the market, prospect that would perchance change the market construction every bit good.
The research inquiry of this survey is: ‘Is the market construction for underwear in Agioi Anargyroi an oligopoly or is it monopolistic competition? ‘
Review of relevant theories
The two market constructions that could outdo depict the underwear market in Agioi Anargyroi will be analyzed.
Oligopoly
The term “ oligopoly ” comes from Grecian roots intending “ few Sellerss, ” and that is the manner that oligopoly differs both from Perfect competition and monopoly — there is more than one marketer, but non “ really many. ” Of class, this is a obscure construct — the vagueness is ineluctable in the usage of the comparative term “ few ” — and economic experts have debated on the exact boundaries between “ few ” and “ many. For the little figure of Sellerss to be stable, there presumptively must be some “ barriers to entry ” of new rivals.
Economists have been discoursing oligopoly monetary values and net incomes since the 1840 ‘s. In rule, the oligopoly ‘s net incomes could ne’er be higher than those of a monopoly — since the monopoly chooses the monetary value that maximizes industry net incomes. A monetary value higher than the monopoly monetary value would merely cut down net incomes ( by driving off excessively many clients ) , so we would n’t anticipate to see a monetary value above the monopoly monetary value. At the other extreme, in the long tally, no industry could be stable with monetary values and net incomes lower than those of a absolutely competitory industry in long-term equilibrium: zero economic net incomes and the supply-and-demand equilibrium monetary value. But where in this scope will the oligopoly ‘s monetary values settle?
There are four major hypotheses about oligopoly pricing:
The oligopoly houses will cabal and join forces to bear down the monopoly monetary value and acquire monopoly net incomes. Therefore, they are mutualist.
The oligopoly houses will vie on monetary value so that the monetary value and net incomes will be the same as those of a absolutely competitory industry.
The oligopoly monetary value and net incomes will be someplace between the monopoly and competitory terminals of the graduated table.
Oligopoly monetary values and net incomes are “ undetermined. ” That is, they may be anything within the scope, and are unpredictable.
We say that an industry is more concentrated when it is more dominated by a few big houses — in other words, when its construction comes closer to the monopoly terminal of the graduated table. One unsmooth manner to mensurate the concentration of an industry is to calculate the part of the industry ‘s gross revenues gross that is earned by the biggest four ( or three or eight ) houses in the industry. This is called the four-firm concentration ratio, and the bigger the four-firm concentration ratio, the more concentrated and monopoly-like the industry is. There are other, more complicated ways to mensurate industry concentration that take into history all of the houses in the industry, instead than merely the biggest four ; but we will happen industries rank about the same for concentration nevertheless we measure it.
The more “ concentrated ” the oligopoly is — that is, the fewer and bigger the houses are, so that it more about resembles a monopoly — the nearer monopoly net incomes and monetary values the industry will come. And, one time once more, the grounds of observation agrees with common sense. Here, once more, there is some possible contention, but the weight of grounds is that more concentrated industries do hold slightly higher net incomes ( numbering involvement payments as a cost ) . So we may believe of a spectrum of industries, with competitory industries at one terminal and monopolies at the other, and with oligopolies falling at the points in between. That ‘s non really precise, but it seems to suit the facts reasonably good.
Monopolistic Competition
In monopolistic competition the merchandises sold by the different houses in the industry group are non homogeneous but differentiated. Therefore, each house has a “ monopoly ” of its ain merchandise. But it is non a true monopoly because the differentiated merchandises are “ close replacements. ” Once once more, we have certain vagueness here: how near is a “ close replacement? ” But one time once more, the vagueness is in the facts, non in the treatment: the merchandises of existent houses may be more or less close replacements in different instances. For monopolistic competition, nevertheless, entry is free.
In discoursing industries that are neither monopolies nor absolutely competitory, economic experts have tended to get down from the four features of a absolutely competitory industry. We recall that those features are: A
Many purchasers and Sellerss and therefore the market end product ca n’t be affected by one house
A homogeneous merchandise
Sufficient cognition ( there is perfect cognition on what merchandises are on offer and at what monetary value )
Free entry ( there are no barriers to entry )
If there are merely a few houses ( but more than one ) , diverting from the first feature, the industry is said to be an “ oligopoly. ” Since the nineteen-twenties, economic experts have besides discussed the state of affairs when an “ industry ” deviates merely in the 2nd feature. This is called “ monopolistic competition, ” and we have “ monopolistic competition ” when a group of houses sell closely related, but non homogeneous merchandises. Alternatively, the merchandises are said to be “ differentiated merchandises. ” Therefore, the features of “ monopolistic competition ” are:
Many purchasers and Sellerss and therefore the market end product ca n’t be affected by one house
Differentiated merchandises
Sufficient cognition ( there is perfect cognition on what merchandises are on offer and at what monetary value )
Free entry ( there are no barriers to entry )
To state that merchandises are differentiated is to state that the merchandises may be ( more or less ) good replacements, but they are non perfect replacements. For an illustration of a monopolistically competitory “ industry ” we may believe of the hair tonic industry. There are many hairstylists in the state, and most hairdressing houses are rather little. It is at least possible that people know plenty about their hair tonic options so that the “ sufficient cognition ” status is fulfilled. But the merchandises of different hairstylists are non perfect replacements. At the really least, their services are differentiated by location. A hairstylist in Center City Philadelphia is non a perfect replacement for a hairstylist in the suburbs — although they may be good replacements from the point of position of a client who lives in the suburbs but works in Center City. Hairdressers ‘ services may be differentiated in other ways as good. Their manners may be different ; the decor of the salon may be different, and that may do a difference for some clients ; and even the quality of the conversation may do a difference.
Product distinction is characteristic of monopolistic competition, but non limited to monopolistic competition. Oligopolies, excessively, may hold merchandise distinction. Cola drinks would likely be considered as a differentiated oligopoly, an oligopoly merchandise group, instead than a monopolistically competitory market.
The Short Run: In the short tally, the monopolistically competitory house faces limited competition. There are other houses that sell merchandises that are good, but non perfect, replacements for the house ‘s ain merchandise. In the words of British economic expert Joan Robinson, every house has a monopoly of its ain merchandise. When the merchandise is differentiated, that means the house has some monopoly power — possibly non much, if the competing merchandises are close replacements, but some monopoly power, and that means we must utilize the monopoly analysis, as if Figure 1 below.
Figure 1
We see that, as usual in monopoly analysis, the fringy gross ( MR ) is less than the monetary value. The house will put its end product so as to do fringy cost ( MC ) equal to fringy gross, and bear down the corresponding monetary value on the demand curve, so that in this illustration, the monopoly sells 1000 units of end product ( per hebdomad, possibly ) for a monetary value of $ 85 per unit.
But this is merely a short tally state of affairs. We see that the monetary value is greater than the mean cost ( which is $ 74 per unit, in this instance ) giving a net income of $ 11,000 per hebdomad. We remember excessively that this is supranormal net income — cyberspace of all implicit every bit good as explicit costs — so this profitable public presentation will pull new competition in the long tally. What that means is that new houses will put up, and bing houses will alter their merchandises, so that there will be more, and closer, replacements in the long tally. That will switch the demand for this house ‘s net incomes downward and possibly do the cost curves to switch upward every bit good, squashing the net income borders.
The Long Run: In monopolistic competition, when one house or merchandise assortment is profitable, it will pull more competition — more replacements and closer replacements for the profitable merchandise type. Therefore, demand will switch downward and ( possibly ) costs will increase. This will travel on every bit long as the house and its merchandise type remain profitable. A new “ long tally equilibrium ” is reached when ( economic ) net incomes have been eliminated. This is shown in Figure 2:
Figure 2
In this illustration, the house can interrupt even by selling 935 units of end product at a monetary value of $ 76 per unit. The net income — zero — is the greatest net income the house can do, so net income is being maximized ( as usual ) with the end product that makes MC=MR. In this instance supranormal net incomes are non made.
Data Collection and Analysis
This portion of the essay is composed of two distinguishable parts. In the first portion will be examined the clients ‘ position on the topic as there will be presented a questionnaire covering all facets relevant to the topic. In the 2nd portion there will be examined whether the stores collide as the monetary values charged on merchandises of the same type will be compared.
To which age group do you belong?
Up to 18
Above 65
18-35
35-50
50-65
I do n’t wish to reply
Which is your gender?
Female
Male
Are you the chief determination shaper in the house?
Yes
No
Are you satisfied by the bing market for underwear in your country?
Yes
No
Do you believe that there are adequate stores in your country?
Yes
No
Are you satisfied by the sum of merchandises available in your market?
Yes
No
Make you happen any difference between the following merchandises?
Luna Secret – Victory Dona
Yes No
61 % 39 %
Palco Tai – Sloggi Tai
Yes No
65 % 35 %
Apple Looney tunes – Minerva Disney
Yes No
68 % 32 %
Ioannidis ( 5414 ) – Mystico
Yes No
63 % 37 %
Palco – Minerva
Yes No
64 % 36 %
Paul and Teo – Isabelle
Yes No
62 % 38 %
Calvin Klein – Master of education
Yes No
59 % 41 %
Apple Looney Tunes – Minerva Disney
Yes No
60 % 40 %
Palco – Minerva
Yes No
52 % 48 %
Ioannidis – Minerva
Yes No
66 % 34 %
Average
Yes 62 % No 38 %
Have you noticed any differences in footings of the monetary values between the undermentioned merchandises or are they the same?
Luna Secret – Victory Dona
Yes No
63 % 37 %
Palco Tai – Sloggi Tai
Yes No
61 % 39 %
Apple Looney tunes – Minerva Disney
Yes No
68 % 32 %
Ioannidis ( 5414 ) – Mystico
Yes No
60 % 40 %
Palco – Minerva
Yes No
62 % 38 %
Paul and Teo – Isabelle
Yes No
66 % 34 %
Calvin Klein – Master of education
Yes No
58 % 42 %
Apple Looney Tunes – Minerva Disney
Yes No
65 % 35 %
Palco – Minerva
Yes No
70 % 30 %
Ioannidis – Minerva
Yes No
64 % 36 %
Average
Yes 64 % No 36 %
Do you purchase underwear for people other than yourself ( kids, gifts etc. ) ?
No
Yes
You choose to purchase from the store you do becauseaˆ¦
It has lower monetary values
Has merchandises of higher quality
It has merchandises from trade names that can non be found someplace else
For the concluding inquiry merely the three above replies were given as possible responses.
In order to analyze the market construction of underwear stores in Agioi Anargyroi, the undermentioned tabular arraies present the mean hebdomadal monetary values of the two stores. The mathematical expression used to cipher the norm of the monetary values is I?p/n, where I?p represents the amount of the assorted monetary values within a hebdomad of a certain merchandise and n represents the different monetary values taken ( in this instance 6, one for each working twenty-four hours )
In the instance that the stores had formed a conniving oligopoly they would hold charged monetary values of similar or indistinguishable sum for their several merchandises and no monetary value competition would hold existed.
This seems that it does non use in our instance. First, from the above tabular arraies we observe that the stores are bear downing different monetary values, which implies that they compete with each other by following a monetary value war tactic alternatively of conspiring. A monetary value war is defined as the monetary value alterations from stores which intend to undersell rival stores. Its purpose is to acquire gross revenues from the competition. Apart from the fact that the monetary values charged are different the monetary values fluctuate on different forms every bit good.
This takes topographic point more intensively during the price reduction periods of August and October where the monetary values fluctuations are great and of different value for each store and merchandise. Specifically the monetary values mentioned above are illustrated under the label hebdomad 1, hebdomad 2 and hebdomad 12, hebdomad 13 as during the first and last hebdomads of the probe the stores functioned under price reduction period conditions.
It is clear that the stores participate in a monetary value competition but farther research brings up new informations which indicates the being of a non-price competition as good. The two stores offer a assortment of extra services to their clients in order to do their stores more attractive. Both of them offer parking infinites ( Onar store offers 10 and BBS store offers 15 parking infinites ) sing a general job in the country that has to make with the fact that this portion of the metropolis is overcrowded and there are non plenty available parking musca volitanss for possible clients. Besides both of them provide air conditioned suites for the clients ‘ comfort while Onar store is consisted of 3 floors and at the same clip BBS store is consisted of 2 floors.
From the informations above we can see that the stores attempt to pull clients and derive more gross revenues by supplying excess services attach toing their shopping. This class of actions consequences in the formation of some sort of trade name trueness and accordingly the formation of a more inelastic demand curve.
Finally, most of the factors which define an oligopoly ( named in the relevant theories subdivision antecedently ) do non be. As observed the stores do vie in footings of the monetary values as they do non bear down indistinguishable monetary values and they do non change their monetary value in the same manner. Afterwards, there are no inordinate barriers to entry which may ensue in the absence of possible rivals. Additionally, based on the clients ‘ view the merchandises are non considered as
Decision
The purpose of this essay was to analyze whether the market construction of the underwear market in Agioi Anargyroi was an oligopoly or monopolistic competition as stated in the research inquiry antecedently. The two stores which ( practically ) consist the market ( as they are the lone 1s in the country ) were exhaustively examined.
Everyday for 13 back-to-back hebdomads the monetary values of merchandises of the same type provided by the two stores were recorded in order to analyze their fluctuations and observe any indicants of a conniving oligopoly. The information collected showed that there were fluctuations on the monetary values charged by the two stores. These fluctuations indicate the being of a monetary value war peculiarly during the price reduction periods of August and October when the two stores attempt to pull the clients ‘ purpose by take downing drastically their monetary values.
In add-on to the monetary value competition mentioned above the two stores are involved in a non-price competition as good. Indicative illustrations of such a signifier of competition are the proviso of garage topographic points and the fact that each store is composed of multiple floors consisted of air-conditioned suites.
In add-on, through the usage of a questionnaire it was examined whether the consumers considered the merchandises which were ab initio stated being of the same type as homogenous or non. The consequences clearly showed that although the consumers acknowledged that merchandises ( categorized in twosomes ) were really similar, they did non comprehend them as homogenous.
In all, the informations processed lead us to the decision that the initial hypothesis was invalid. This statement is supported by the fact that the stores are involved in a monetary value and a non-price competition while at the same clip the merchandises sold are non considered as homogenous by the consumers.
Finally, the restrictions of this survey should be presented. Initially, it should be stated that the consequences of the survey are valid for this specific market in Agioi Anargyroi and may non be for similar markets in other countries. The information and accordingly the decisions of this survey apply merely for that peculiar clip period of 2010, during some other clip period the information may be different. Last, the merchandises which were assumed to be homogenous ab initio, might had been falsely chosen and some other merchandises sold by the two stores which were non assumed to be homogenous were considered as homogenous by the consumers.
