Topic: Competition in the Australian Market for Groceries

Assignment 1 Due Date:     Fri, 28 of September, 2012
Length:     2000 words
Value:     25 marks
Topic/s:     Competition in the Australian Market for Groceries
Question:     The retail grocery sector in Australia came under a lot of criticism in the past couple of years because of the rising prices of goods. One issue in the debate was the role of competition in the sector. The Australian Competition and Consumer Commission estimated that Coles and Woolworths accounted for about 70% of packaged grocery sales and 50% of fresh food product sales in Australia. This assignment asks you to apply microeconomic principles to analyse the market for groceries in Australia.
1. Is the retail grocery market in Australia a perfectly competitive one? Outline the major reasons why it might not be perfectly competitive. What are the likely implications of this for consumers? (800 words)
2. Explain the concept of ‘workable competition’. Why might it be relevant in this market? What indicators could be used to assess whether workable competition exists in the retail grocery market? Justify your answer. (400 words)
3. The major retail grocery chains are vertically integrated. Explain the meaning of this term and the implications for any competitors in the industry. Suggest a strategy for successful entry of a new competitor. Draw up a payoff matrix to illustrate your strategy. (800 words).

Some references to get you started –
ACCC (2008) Report of the ACCC inquiry into the competitiveness of retail prices for standard groceries, available on the web at www.accc.gov.au
Australian Economic Review Policy Forum: Competition Issues in the Australian

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