Question

In recent years bubble tea has become a craze among Singaporean consumers, leading to many new firms entering this market either as new Singaporean startups or as established firms from aboard. There are now over 50 competitors in Singapore each of which sell their own variations of bubble tea with different flavours, colours, ingredients and packaging. Using the theory and models of market structure, examine this industry. Should government be worried about any aspect of how an industry with this market structure will perform?

Answer 1

Because there are more number of competitors but each have their own variations of bubble tea it can be mentioned that this is a monopolistic competition in nature according to the model of market structures and this is because of the fact that a monopolistic market structure has no barriers to entry and that is the reason why we have over 50 competitors and also a monopolistic competitive has a product differentiation and that is the reason why each has their own variants and therefore they can make their own profits if they can increase the brand loyalty due to the variation they have. The government should not be worried about this market structure in this is because of the fact that there are no barriers to entry in monopolistic competition and better the product in service better will be the outcome and competition also plays a major role in this market structure and unlike Monopoly oligopoly where there is a chance of collusion or controlling the price here that is not the case and that is the reason why the government need not be worried