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A case study of Monopolistic Competition




A case study of Monopolistic Competition ? the motor vehicle repair (MVR) and servicing industry;The typical British small garage is stereotyped as untidy, messy, cluttered with hoists and equipment, with workers doing their jobs to the clatter of tools and blaring radio.;This picture is quite different from that of the early years of the automobile. In those days, work on the car was the domain of the chauffeur or blacksmith, or the manufacturer if repairs were beyond both.;This was to change following the Second World War. As the volume of cars grew so the motor repair sector began to expand, giving employment to the many mechanically trained ex-servicemen.;The market grew so quickly that there was little chance of erecting entry barriers. For example, although there were moves to introduce specific (City and Guilds) qualifications for mechanics and thereby impose a degree of restricted entry on the industry, this was never fully established. The result is to be seen today.;The motor vehicle repair industry has developed into a good example of a monopolistically competitive industry.;In 2001, it was estimated that the MVR industry in the UK employed just over 170,000 people in about 44,000 businesses. The statistics also show that the industry is still dominated by small and medium-sized businesses (SMEs) with over half the workforce (58%) employed in either zero-employee enterprises e.g. sole traders or partnerships, or businesses employing less than 10 people. Companies with less than 50 people accounted for approx. 83% of the workforce.;The vehicle repair and servicing industry is diverse, being made up of general repairers, specialist repairers (i.e. bodywork, electrics), dealers and petrol stations. With so many garages, the industry has remained a highly competitive one. However, specialism and locality enable the various garages to maintain a fairly constant degree of control over their price.;Questions;1) What are the specific features of the motor vehicle repair industry that have restricted the growth of large-scale operations?;2) What other industries can you think of that exhibit similar characteristics?


Paper#33172 | Written in 18-Jul-2015

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