Consider Singapore Retail Firms (Retailers) and Discuss If Oligopoly or Monopolistic Competition Best Explains These Retailers’ Market Behaviour.

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Consider Singapore retail firms (retailers) and discuss if oligopoly or monopolistic competition best explains these retailers’ market behaviour.
Does oligopoly or monopolistic competition better explain the market behaviour of Singapore retail firms? First, a few definitions are in order.

First, retailers are firms that do not produce their goods that are sold, but only sell goods which are in turn manufactured by manufacturers or producers.

Second, oligopoly is characterised by many buyers but few sellers, each of the sellers interacting strategically against their rivals, which are the other firms competing in the oligopolistic industry, and there are high barriers to entry, usually caused by high economies of scale.

Third, monopolistic competition is a market structure where there are many buyers and sellers, few barriers to entry, and differentiated products that are quite different from other competitors, but psychologically or physically different. For example, NTUC and Giant hypermarket are examples of oligopoly while clothing retail shops such as Charles and Keith are examples of monopolistic competition.

First, monopolistic competitive firms can make independent decisions on pricing and output, whereas oligopolies are mutually interdependent because they are rivals rather than competitors. There is price stickiness in oligopoly, shown by the oligopoly kinked demand curve model, which shows there is no incentive for firms to raise or lower prices as long as their rivals do not do so. This is because raising price leads to losses in revenue along the inelastic part of the demand curve, and lowering price leads to a price war because the other rivals will join in the fray metaphorically.

Also, price stability, furthermore, could be due to collusion, which means that oligopolies tend to gang up against the public interest by raising prices…...

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