Perfect Competition

Topics: Shopping mall, Monopolistic competition, Monopoly Pages: 6 (2412 words) Published: July 13, 2013
ECON 202-Winter 2013
A real life tour of perfect competition and monopolistic competition Team:
Loo Chun Wai
Filbert Bo Zhuang Wei
Chai Ann Roo

Lecturer: Mr. Chuah Shu Guan

Perfect Competition
The market that we want to use for demonstrating perfect competition is the smart phone accessories industry which including casing as well. What make us to say it is a perfect competition? Firstly, the number of firm is huge enough to say it is numerous. For example, we can see at least five stalls of vendors selling smart phone accessories in a shopping complex, it will be included Iphone, Samsung, HTC, blackberry. Imagine one shopping mall having ten stalls of the respective vendors, which means in our current city, Petaling Jaya there will be around hundreds of stalls selling smart phone accessories, not even to mention about the stalls in the whole Malaysia. Secondly, the products of every stall are quite similar and close to identical as long as you can see the same type of accessories selling in different shopping malls which can be explained by the existence of the homogeneity of product. Thirdly, the barrier to entry is very low as we can open a stall very easily and we might shut down the stall anytime. For example, the owner of the firm that we surveyed said that he has tried to open as many as possible stalls in a single shopping mall, but in the following day the stall can be closed or moved to other place because there is no barriers prevent firms from leaving the market, and he had closed three stalls in different places because the revenues of a stall per day is not enough to cover the total cost, hence, he chose to close the stall as he was using a pay and sell method which means you open the stall one day, you pay for one day of rental fees. However, the employer of a shopping complex will sign contract with those renters. Undoubtedly, the firms cannot quit anytime but what we mean by any time is short term such as three months. Thirdly, we can simply get information of phone casing like internet, hanging around in shopping malls, and we can know the price of same product but in different places. Besides, each one of the stall is negligible portion of the whole phone casing industry, each stall decision has no effect on the price of the products. Consumers will not care from which firm they buy the phone casing. For instance, when we see a beautiful phone casing via facebook advertisement or other online shopping websites, we will not care about which firm is the casing from, which country it from and other small problem, we will just look at the price, feel that it is reasonable then press “ORDER” or “PURCHASE”. Example in real life: when we are hanging around in a shopping mall, we will see lots of phone casing stalls, after we find a phone casing that we interested in, we will start to compare the price with other stalls, after that we will buy from the stall with lower price. This shows that we don’t care which firm we buy from but the price of the phone casing. Based on our survey, we can see some difference between those smart phone accessories although they are in the same category as “Perfect Competition”. For service attitude, some of the stalls are trying to employ more female promoters to attract more customers as from the results we can get from websites, there are more male consumers using smart phone that means that the market for smart phone accessories is more tend to male customers. Besides, the sales systems for the stalls nowadays have also improved a lot such as changing the packaging of their products and start to use bar code system which give a uniform price that replace the old sales system such as customers asking for discount for their products, which is a more messy sales system. Yet, some stalls still remain the system as that is the way how they attract consumer. Consumer usually like negotiate, they feel satisfied if their negotiation works. Nonetheless,...
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