1.5 Competitive and concentrated markets

An industry body is considering four possible developments in the market for same-day parcel delivery services in one region.

Table 1 shows how each development would change conditions in the market.

Development	Change in the number of providers	Differentiation between services	Start-up costs for new providers
Development P	Two providers merge	Becomes stronger	Rise
Development Q	Four providers enter	Becomes stronger	Rise
Development R	One provider exits	Becomes weaker	Fall
Development S	Three providers enter	Becomes weaker	Fall

Using Table 1, which development is likely to give sellers the greatest increase in freedom over the prices they charge?

[1]

Development P

Development Q

Development R

Development S

Table 1 shows how each development would change conditions in the market.

Development	Change in the number of providers	Differentiation between services	Start-up costs for new providers
Development P	Two providers merge	Becomes stronger	Rise
Development Q	Four providers enter	Becomes stronger	Rise
Development R	One provider exits	Becomes weaker	Fall
Development S	Three providers enter	Becomes weaker	Fall

Using Table 1, which development is likely to give sellers the greatest increase in freedom over the prices they charge?

1.5 Competitive and concentrated markets Questions