The paper “ Competition in the Australian Market for Groceries” is a great example of the assignment on macro & microeconomics. The Australian retail grocery market is not a perfectly competitive market. A perfectly competitive market refers to markets in which there are several small firms operating in a highly competitive environment. It is normally assumed to have a number of characteristics. However, these characteristics lack in the Australian retail grocery market. According to Grant and Vidler (2003), a perfectly competitive market is a market that consists of a huge number of small firms that produce homogenous or identical commodities, contributes a small percentage of the final industry’ s output, sell their commodities to consumers who perfectly understands the behavior of all firms operating in the market, understand well the behavior of other firms in the industry and are absolutely free to enter or exit the market.
These views are also supported by Bernanke (2003). Bernanke (2003) adds that a perfectly competitive market is a market in which there are many buyers and sellers. Each of which purchases and sells a small proportion of the entire amount of commodities traded in the market. Therefore, by considering the above-mentioned characteristics, it is quite evident that the Australian retail grocery market is not a perfectly competitive one.
The Australian retail grocery market is characterized by few firms dominating the entire industry. It is believed that Coles and Woolworths dominate the Australian retail grocery market. The Australian Competition and Consumer Commission estimates that, in the Australian retail grocery market, Woolworths and Coles account for approximately 70% of packaged grocery sales and 50% of fresh food product sales.
This, however, is not in line with what many economists believe to be features of a perfectly competitive market. As mentioned earlier, a perfectly competitive market is characterized by the existence of many firms whose individual sales account for a small proportion of the entire amount of products that are sold in the market. However, this is not the case with the Australian retail grocery market. In this market, there are two firms that take a huge proportion of the entire sales in the market, thus making it not a perfectly competitive one.
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