Question

Private tuition centres are a big industry in Singapore with over 500 such centres that reportedly serve more than 95% of all college students. Tuition fees can be high and some families pay more than $3000 a month to send their children to private tuition. Using the theory and models of market structure, examine this industry. Should government be worried about any aspect of how an industry with this particular market structure will perform?

Answer 1

Since there are 500 tuition centers and 95% of the students goes to these centers, then it shows this industry to be a monopolistic competition. It is considered as monopolistic competition, because, tuition centers are price setters and charge high price for the services on the basis of product differentiation as different teachers offer different quality in their tuition. The industry has huge number of buyers and sellers, and there is free entry and exit. So, it is a monopolistic competition. This industry has firms as tuition centers that can earn positive economic profit in the short run, but in the long run, they will earn zero economic profit.

Though, the firms or tuition centers can have excess capacity, but new firms can enter and cater the students. So, government is only required to regulate the industry in terms of no any anti-competitive policy and anti-trust policies should be followed by any large or small centers so that price can be manipulated or smaller firm can be put out of the market.