Monopolistic Market Competition Of The Coffee Shop...

Monopolistic Market Competition In the UK, the three leading competitive coffee brands are Costa Coffee (with 1,992 outlets), Starbucks Coffee Company (with 849 outlets) and Caffà ¨ Nero (with 620 outlets). They enjoy a 3-firm concentration of 53%; (Market concentration measures the market share of the largest companies in an industry) The coffee shop industry is a monopolistically competitive market; this entails a market situation where there are a lot of large companies competing, but each company has some degree of market power, being able to determine its own price and ergo have an insignificantly small share of the market (low concentration). A monopolistically competitive market besides being a perfect competition has its characteristics of a monopoly too. (imperfect competition). (Monopoly is a market situation where a single company has most of the market for a certain type of product or service and often times accompany inflation of prices which deem inferior products over other companies.) When companies are making decisions, the companies do not worry about how the rivals will react, in part to each company’s actions are unlikely to affect its rivals to a great extent hence they are independent. In addition, there is perfect knowledge in the market hence new companies have the freedom to enter into the industry. The companies are also profit maximizers, producing output where marginal revenue equals marginal cost; the profit maximising condition. Companies in aShow MoreRelatedAnalysis Of The Commercial District Of Ss15 Essay1106 Words   |  5 Pagestrend includes the exponential increase in coffee drinking culture that catalyze the growth of cafes and restaurant within Klang Valley. 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