What Is The Structure Of The Economics Tuition Market?

In any standard economics course or economics tuition programme, one will study the structure of the market. In the chapter on market structure, one will learn that there exist four types of market structures which include perfect competition, monopoly, monopolistic competition and oligopoly. Examples of monopoly, monopolistic competition and oligopoly include the TV broadcast market in Singapore, the restaurant market and the pharmaceutical market respectively. As an economics tutor who has been teaching the subject for 10 years, an interesting question often asked by the students in my economics tuition classes is, what is the market structure of economics tuition? The answer to the question depends on the definition of the market for economics tuition.

National Market for Economics Tuition

In the national market for economics tuition, the market structure is monopolistic competition. In monopolistic competition, there exist a large number of small firms which sell differentiated products. In reality, there exist a large number of small economics tuition centres in Singapore. In many of these economics tuition centres, there is only one economics tutor. The sole economics tutor conducts all the economics tuition classes on both weekdays and weekends. The economics tutors at the different economics tuition centres have different teaching style and therefore they provide differentiated services. However, unlike the case in theory, economics tuition centres are able to make supernormal profit in the long run. This is due to factors such as imperfect knowledge, non-price competition, strategic location and difference in cost structure. Some economics tutors are better at teaching than others. Some economics tutors spend more on marketing than others. Some economics tuition centres are located in a better area than others. For example, economics tuition centres located in Bishan which are near Raffles Institution and other junior colleges generally have more students than those which are not. These economics tuition centres are able to make supernormal profit in the long run.

Regional Market for Economics Tuition

Although the market for economics tuition in Singapore is monopolistic competition, the market for economics tuition in a region may be oligopoly. In oligopoly, there exist a small number of large firms generally selling differentiated products. For example, although there are many economics tuition centres in Singapore, there are only four economics tuition centres in Bishan, namely Economics Cafe Learning Centre, Economics Focus, Learners’ Lodge and Adam Smith. With only four economics tuition centres in Bishan, each firm has about 25 percent of the market share and hence is considered a large firm. An important characteristic of oligopoly is mutual interdependence. Due to the large market share of each firm, the actions of one firm affects and are affected by the actions of the other firms. Therefore, no firm can assume that it exists in a vacuum. This is the case of the four economics tuition centres in Bishan. The pricing decisions of the four centres are mutually interdependent. For example, if Economics Focus reduces its fee, the effect on the other three economics tuition centres will be significant if not substantially. Therefore, the three centres may follow suit.

Local Market For Economics Tuition

In a local market, the market for economics tuition may be a monopoly. In monopoly, there exists only one firm which has 100 percent of the market share. For example, although there are four economics tuition centres in Bishan, there is only one economics tuition centre in Bishan Street 24. As the only economics tuition centre in Bishan Street 24, Economics Focus is a monopoly in the local market for economics tuition. Therefore, it has substantial market power in the market.

Christopher Wray

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