The competition in

supermarkets
 The market structure of
supermarket:
Oligopoly:
Features
-Dominated by a few sellers
-Restriction on Entry
-Imperfect Market Information
There are two main types of firm be
haviour in the market:
1.Price competition

2. Non-price competition
What is price competition?

Sellers complete by setting the lowest

price
Then, what is non-price
competition?
It includes all form of competition,
other than that of price. e.g free
drinks, gifts to customers, lucky
draws to attract customers, etc.
 Pricing Tactics:

Supermarkets will use

“All-or-nothing pricing”,
and “A tie-in contract”
to extract consumers.
 All or nothing pricing

Supermarkets may sell products

like 10 dollars for one but 15
dollars for two as an example of
all or nothing pricing that the
consumer must either buy the
whole package or none at all.
A tie-in (or product bundling) contract
Also, supermarkets may offer
to sell a good at a given price
on the condition that buyers
also buy another good at a
stated price.
For example, a supermarket
sells 20 dollars for a pack of
coke. Consumers can buy it
and pay an extract 5 dollars to
buy a bottle of drink.
Non-pricing competition

Supermarkets have not only

price competition, but also
non-price competition.
Supermarkets may give some
products free of charge if
consumers buy specific products.

For example, if consumers buy a

pack of noodles, supermarkets will
give a small doll to consumers with
free of charge.
 The result of price competition
Some products of supermarkets are substitutes, if
the price of a product in supermarket A decrease,
the quantity demanded of product A increase in
the supermarket. The demand of the same
product in supermarket B will decrease since they
are substitutes given the price and quality of the
product are the same in both supermarket A and
Supermarket B
B.
 The result of non-price competition
Some products of supermarkets are
substitutes. If the product in
supermarket A is offered free drinks,
gifts or other special prizes to
customers, the demand for the product
A increases in the supermarket. The
demand for the product in supermarket
B will decrease since they are
substitutes.
Conclusion
the two main behaviour of supermark
ets in Hong Kong are price competition
and non-price competition.
supermarkets have different behavio
ur in order to attract more business an
d compete with other supermarkets.
different behaviour of supermarket m
ay affect their revenue and profit .
Reference:
-Advanced Level Microeconomics 1&2
Lam Pun Lee
Macmillan New Asia Publishers LTD.

Leader: Vicki, Chan Wai Ki

Members: Cherry, Hui Wing Sze
Caren, Ngi Ka Yan