Microecons Project on Oligopoly

.Introduction to Singapore Taxi Operators

There is a total number of seven Singapore Taxi Operators in Singapore. They are the Yellow-Top-Taxi, Prime Taxi, Premier Taxis, SMRT Taxis, Smart Taxis, Trans-Cab and CityCab & Comfort Taxi (under one company, called ComfortDelgro). Taxis make up one of the core transportation in Singapore, with a total number of about 26,000 taxis in Singapore. All Singapore cabs are registered with big companies that are given license to run the business by Singapore government. The biggest Taxi Operator is Comfort Delgro with a fleet of more than 15,000 taxis. While the smallest Taxi Operator is Prime Taxi with only a fleet of only about 350 taxis. As this is a small market, competition is not very big as others taxi operators will follow the price set by the dominant taxi operator which is Comfort Delgro. Singapore taxi operators revenue is about $1.5 billion a year.

Introduction to Comfort Delgro

Established in 1970, Comfort Transportation ( Comfort) was then known as the Workers'Co-operative Commonwealth for Transport Limited with the aim to provide taxi drivers with a profession and a better life. From its humble beginnings of 1000 Morris Oxford taxis to its present fleet of over 10,000 taxis. Comfort has grown to become the larger of the two taxi companies that ComfortDelgro has.

1.Type of market structure : Oligopoly

Singapore Taxi Operators have an Oligopoly market structure in the industry as there are few large dominant firms. For example, ComfortDelgro is only the largest dominant firm among all the other taxi operators. The other taxi operators do not have much power to control the market as ComfortDelgro has more than half the total number of taxis in Singapore. Even if the other 6 taxis operators joined together, ComfortDelgro will still have more taxis than them.

Another example is that all taxi operators would be offering to ferry customers around Singapore or bring them from one place to another. However different taxi operators have different kinds of services. Such as ComfortDelgro which provides car rental & leasing, insurance broking services and vehicle inspection & technical testing services, but Prime Taxi does not have these services. Besides that, it is hard for a new taxi operator to come into the market as the market is already dominated by other bigger taxi operators.

Difference between Oligopoly and other market structures.

Oligopoly

* Few large dominant firms

* Differentiated product

* Difficult barriers to entry Monopolistic

* Many sellers

* Differentiated product

* Freedom of entry and exit

* Imperfect knowledge

Perfect Competition

* Large number of small firms

* A homogenous product

* Free entry and exit of firms

* Perfect knowledge

* Price taker Monopoly

* Single seller

* Unique product

* Barriers of entry

2ai) Factors affecting demand of the industry.

Change in quantity demanded

Figure 1.0 The change in quantity demanded is caused by the change in price of a certain product or services . For example , relating to our industry, about Taxi Operators . Now , $2.80 is charged for on the meter of a Taxi once you get on , if the price is being changed to $5 once you get on a taxi , the quantity demanded for Taxi will fall because of the increase of the price .

Change in demand

Figure 1.1 Figure 1.2 The change in consumer's income will also play a part in the demand of Taxi's . With a higher income , consumers have a higher purchasing power and would rather take a cab then squeeze in a bus during peak hours . This would result in a increase in demand for Taxi . Vice versa , if the income of consumers drop , there would be a decrease in demand for Taxi .

As seen , Figure 1.1 shows the increase in the demand for Taxi's due to higher income . Figure 1.2 shows the decrease in demand for Taxi's due to lower income .

Change in prices of substitutes

Figure 1.3 Figure 1.4 Another factor would be the change in prices of substitutes . The only substitutes of Taxi operators is the bus . For example ; if buses lowered their fares , there would be a decrease in demand for Taxi since it'll be cheaper to take a bus . However , if buses increase their fares , there would be a increase in demand for Taxi as it will be faster and more convenient .

As seen , Figure 1.3 shows the increase in fares for buses . This will lead to a increase in demand for Taxis as shown in Figure 1.4

2aii)Factors affecting supply of the industry.

Change in number of suppliers

Figure 1.5 A change in the number of suppliers will lead to a increase in supply of Taxi in this case .. For example ; if there is a 100,000 of Taxi on Singapore , Comfort Delgro , the taxi company, decided to buy 10,000 more Taxi's . This will lead to a increase of supply of Taxis .

Figure 1.5 shows the increase in supply due to change in numbers of suppliers.

Technological Improvement

Figure 1.6

As technology improves, it will lead to cost reduction to produce the goods , therefore the supply will increase which causes supply curve to shift right-wards .

Figure 1.6 shows the increase in supplies due to technological improvement .

Change in the factor of production

Figure 1.7

When factor price increase , the production cost will increase . This will make it more expensive