ASSIGNMENT 3 – STRUCTURE – CONDUCT – PERFORMANCE ANALYSIS As a result, the taxi service in Vietnam belongs to homogeneous and product differentiation that deny the monopoly market of Vietnam Taxi mar

ASSIGNMENT – STRUCTURE – CONDUCT – PERFORMANCE ANALYSIS Course Code ECON1194C Course Name Prices and Markets Student’s Name Luu Vu Hong Nhi Student’s ID S3863965 Lecturer Le Tam Vi An Word Count 1963 Question 1: Analyzing the characteristics of Market structure I disagree with the statement that the taxi service in Vietnam most closely approximates monopoly To prove this point, there are three main characteristics factors: concentration, product differentiation and barriers to entry that will be analyzed to deny this statement Firstly, monopoly market discusses the market share situation manipulated by the largest specific firm in an industry (Foster et al 2011)) However, Vietnamese 200-company taxi market is known with top major players, namely Mai Linh, VinaSun, VinaTaxi and Grab (Appendix 1) To elucidate, despite the decline in market share, VinaSun still captured a major percentage of HCMC as the leading taxi market region in Vietnam, followed by Mai Linh and TaxiGroup in HaNoi (WFMJ 2020) In 2020, these top companies account for nearly around 50% of the total 174.267 taxi cars which is reported to decline significantly by 50-60% amid Covid-19 in Vietnam with 17,000 cars of Mai Linh, approximately 13,000 cars of Grab, 4.921 cars of VinaSun, 3000 cars of VinaTaxi and 2,000 cars of TaxiGroup (MOT 2020; Kinh Huu 2018; TuoitreNews 2020; SenseMedia 2020; TaxiGroup 2020) Hence, there few firms dominate the Vietnam taxi market and they are competing significantly with each other As Grab becomes a strong competitor joining in the Vietnamese Taxi industry compared to traditional taxi that make reducing revenue of VinaSun Linh which accounts for major market share in Vietnam taxi (Mordor Intelligence 2020) To recap, the taxi service in Vietnam is dominated by few major firms which not belong to the monopoly market Secondly, it is obvious that the purpose of all taxi brands is to transport passengers to any destination Therefore, we can conclude that the Taxi Service in Vietnam is a homogenous product However, the taxi industry divides into two segments are technological taxi and traditional taxi that differentiated in comfortability and service convenience for passengers The firms can distinguish their product from others by innovating app taxis The technological taxis offer a convenient experience of booking a taxi via the internet that can improve time and fare predictability to avoid overcharging by drivers and take passengers into their destination faster The technological taxi also provides a different service that public identification of passenger’s drivers to ensure the safety and customers also can feedback the professional of drivers (Wee 2017) In terms of traditional taxis like VinaSun or Mai Linh, passengers will book a taxi throughout calling for the operator to arrange drivers for them There will be an automatic watch to count how much kilometres will correspond to money and passengers would not know how much they have to pay until they come to their destination (Mai 2019) As a result, the taxi service in Vietnam belongs to homogeneous and product differentiation that deny the monopoly market of Vietnam Taxi market as monopoly market indicates only product differentiation Finally, the newcomers will have some difficulties entering the Vietnamese Taxi market In order to set foot on the taxi service in Vietnam, new firms would have a huge amount of capital because they have to pay for the automobile, hiring drivers, setting up office space and distribution cost (Lahuti 2018) The new firms also have to invest lots of money in advancing technology to compete with technology taxi companies like Grab which is the popular brand investing in technology including Moca e-payments or setting Grab app than other players with $100 millions of initial capital and adding $500 million investment (Cong 2019) Based on these requirements, the small firms will have lots of burden to join in the market While with the big corporations that have a large capital, the company can invest in these requirements and make profit in the long run thanks to economics of scale - the more firms produce, the lower average cost (Lumen n.d) Besides, small firms that want to enter the Vietnam Taxi market also have to face brand awareness issues as Grab, VinaSun and Mai Linh have built a strong brand recognition in Vietnamese passengers Overall, Vietnam's taxi market indicates a high barrier to entry with a large capital investment, economy of scale and updating technology Question 2: Analyzing the pricing strategy of this taxi company Price makers are producers who can manipulate the price of its goods as there are no substitutes (Banterle et al 2020) While price takers are people who can’t change the higher price than the market price to maintain customers and market share (MyAccountingCourse n.d) In this case, products/services are differentiated by owning unique technology-based taxi services that competitors can’t copy easily to attract customers Compared to competitors, they have enough market power which is the ability of a firm to change their price without losing its customers to competitors (Kenton 2020) The more differentiated firms are, the greater power to set their own prices (Shapiro 1998) Therefore, the pricing strategy of this company is price maker As mentioned, Vietnam's taxi service market is known for the homogeneous product/service for serving customers' transportation purposes However, the market penetration of ridehailing firms such as Grab, Uber or Be raises the need for existing taxi companies to use nonprice competition strategies including marketing or innovation instead of price war to compete and boost sales while attracting customers (Muley n.d) One of the advantages of non-price competition is not only gaining more profitability than selling lower price for products, but also avoiding the risk of price war in the market (BoundlessMarketing n.d) The firm offers non-price competition based on creating technology-based to respond to the customer’s demand that competitors can’t copy Hence, customers will try to buy unique products and bargain less as they have no choice For example, Grab is becoming more popular than VinaSun, a traditional taxi as applying differentiation of technology to attract customers (Le 2018) Price discrimination indicates company charge different prices for different segments of customers to the same product (Economicsonline n.d) In order for successful price discrimination, the market needs to satisfy requirements, namely firms’ ability to possess some degree of market power, separate customers and prevent arbitrage Vietnam’s taxi market only can own some degree of market power as mentioned but to satisfy all requirements, we can consider the ride-hailing in Vietnam as a monopoly market as Grab dominates more than 70% of Vietnamese ride-hailing market (ReportLinker 2020) Moreover, Grab can apply to the separate customer by applying vehicles: motorbike and car for different groups of customers Besides, Grab cooperated with FPT to develop AI technology that became an exclusive firm compared to competitors (Grab n.d) Question 3: Reflection on the Industry Talk Session Throughout the Industry Talk session with Mr Henry Dinh about the beer industry, determine the beer’s company behaviors in competition based on company level, brand level and barriers to entry Mr Henry gave out that despite many beer brands launched in the market, a few firms controlled all brands Firstly, at company level, the bigger the company is, the larger economies of scale the company has with more advanced technology and lower cost For instance, AB InBev is a large company with increasing negative working capital but low operating cost thanks to the negotiation and technology investment capabilities Secondly, at brand level, many firms differentiate taste by creating premium products, marketing or machine innovation as a key to compete Moreover, in the beer industry, pricing strategies corresponding to product differentiation not rely on cost production but the consumers’ payment willingness Furthermore, the beer industry has high barriers to entry with legal requirements due to alcohol-based ingredients and costly complicated mega breweries processes However, the technological innovation allows smaller firms to operate and compete with small scale microbreweries to discover further new unique tastes which keep safe and sufficient beer’s good quality without much investment Hence, the craft beer trend as higher-level innovation capacity was boomingly introduced by many entrepreneurs because of lower barriers to entry and the relaxation in legal requirements compared to the industry giants Nowadays, based on technology of producing home breweries, people can create their own breweries at home with the tastes they like That is an aspect of the changing landscape of the beer industry The economy of scale, huge capital working and innovation technology factor in this Industry Talk related to the theory of barrier to entry in Oligopoly market of Prices & Markets course Question 4: Game Theory - Hypothetical case analysis New City Add New Designs Do Nothing Times Good Add New Designs $10,000; $10,000 Do Nothing -$2000; $20,000 $20,000; -$2,000 $15,000; $15,000  New City  If Times Good decides to add new designs, the best option for New City is to add new designs because they will receive the profit of $10,000 which is better than loss of $2,000 and if Times Good chooses to nothing, the best strategy for New City is adding new designs as the payoff received is $20,000 that is higher than $15,000  Times Good  If New City decides to add new designs, the best option for Times Good is adding new designs as they will have a payoff of $10,000, which is better than loss of $2,000 and if New City chooses to nothing, the best strategy for Times Good is to add new designs because they will receive profits of $20,000 that is higher than $15,000  Overall, if there is no collusion, it seems like that both brands would use the strategy of adding new designs  Therefore, the Nash equilibrium of both firms is considered as “add new designs, add new designs> with the payoff ($10,00; $10,000) because each brand lacks any incentive to consider their initial strategy, despite the other firm’s option  If Times Good and New City have collusion and they seek for mutual interests, both of them should nothing as the market share will not be fluctuated at this process Each firm can receive $15,000 in economic profit for a year As a result, the Pareto Optimum of the game is “Do Nothing; Do Nothing” with the payoff ($15,000; $15,000) Question 5: Investigate the market failure of the taxi market Externalities are positive or negative effects of producing and consuming towards third parties (RMIT lecture slides) Externalities is a significant result in market failure as the price equilibrium does not reflect true costs and benefits of its products accurately (Investopedia n.d) An example of negative externalities in the automobile production is pollution The pollution is released throughout the car’s life cycle including car operation and fuel production (ucsusa 2018) Nowadays, increasing demand for cars in Vietnam leads to higher production capacity and innovation throughout technology Therefore, the rise of mineral extraction and production of raw materials of cars can cause environmental impacts For example, iron gets into steel that accounts for most of the mass in cars or plastics, which are made from petroleum can cause energy consumption, air pollution and release of toxic substances into the environment (greenercars n.d) Supply illustrates the responsibility of firms for their private cost When the firm did not suffer any external cost in production, they will manufacture more cars than the quantity demanded in the market Consequently, the deadweight welfare loss occurs which indicates over-allocation The social cost of car production is high because of social pollution To restrict, the governments can implement taxes incidence from manufacturers to diminish the pollution (oecd n.d) Applying the taxes, the demand will decrease as the tax of emission will make producers in the car industry accountable for extra expense to cover the losses incurred by emission taxes So, the price will increase, the buyers will pay more and producers will receive less after tax (Pmarket1 up to Popt1) Overall, the taxes can discourage market activity and the quantity of supply will decrease (Qmarket down to Qopt) REFERENCE WFMJ 2020, ‘Vietnam Taxi Market Trend With Top Countries Data 2020: Industry Size, Share, Future Challenges, Revenue, Demand, Industry Growth and Top Players Analysis to 2024’, WFMJ, viewed January 2021, Mordor Intelligence 2020, ‘VIETNAM TAXI MARKET - GROWTH, TRENDS, AND FORECAST (2021-2026)’, MordorIntelligence, viewed January 2021, Wee, V 2017, ‘Everything to Need to Know about Grab’, Techedt, viewed January 2021, Mai, T 2019, ‘How to Call a Taxi in Vietnam ?’, BackoftheTours, viewed January 2021, Lahoti, N 2018, ‘A Concise Guide on How to Start a Taxi Business’, Mytaxipulse, viewe 10 January 2021, Hieu 2019, ‘Grab - Gã khổng lồ nhiều điểm yếu Việt Nam’, Zingnews, viewed 10 January 2021, Lumen n.d, ‘Economies of Scale’, lumenlearning, viewed 10 January 2021, Tracy, P 2020, ‘Price Maker’, InvestingAnswer, viewed 10 January 2021, My Accounting Course n.d, ‘What is Price Taker ?’, Myaccountingcourse, viewed 11 January 2021, Kenton, W 2020, ‘Market Power’, Investopedia, viewed 11 January 2021, Shapiro , B 1998, ‘Commodity Busting: Be a Price Marker, Not a Price Taker!’, StrategyBusiness, viewed 11 January 2021, Muley, R n.d, ‘Non-price Economicsdiscussion, competition viewed under 11 Oligopoly (with January Diagram)’, 2021, Lumen n.d, ‘Competitive Dynamics and Pricing’, lumenlearning, viewed 12 January 2021, Le, H 2018, ‘Grab: becoming a taxi 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An empirical analysis in Italian food SMEs", Economia e Diritto Agroalimentare, vol.16, no.2, pp.245 Kinh Huu 2018, ‘Sự thật "175.000 việc làm" Grab tạo ra’, Nguoilaodong, viewed 14 January 2021, Tuoi Tre News n.d, ‘Vietnam taxi giant Mai Linh eyes transformation into tech-based firm’, Tuoitrenews, viewed 15 January Investopedia n.d, ‘How Do Externalities Affect Equilibrium and Create Market Failure?’, Investopedia, viewed 16 January 2021, Greenercars n.d, ‘Automobiles & the Environment’, Greenercars, viewed 17 January 2021, Ucsusa n.d, ‘Cars, Trucks, Buses and Air Pollution - Transportation is a major source of air pollution in the United States’, Union of Concerned Scientists, viewed 15 January 2021, Foster, J.B., McChesney, R.W & Jonna, R.J 2011, "Monopoly and competition in twentyfirst century capitalism", Monthly Review, vol.62, no.11, pp.1-35 Economicsonline n.d, ‘Price discrimination’, Economics Online, viewed 16 January 2021, ReportLinker 2020, ‘Vietnam Ride-Hailing Market -Growth, Trends, and Forecast (2020 – 2025)’, Globenewswire, viewed 16 January 2021, Grab n.d, ‘FPT and Grab partner to research and develop smart traffic solutions for Vietnam’, Grab, viewed 15 January 2021, APPENDIX Appendix ... they come to their destination (Mai 2019) As a result, the taxi service in Vietnam belongs to homogeneous and product differentiation that deny the monopoly market of Vietnam Taxi market as monopoly. .. Besides, small firms that want to enter the Vietnam Taxi market also have to face brand awareness issues as Grab, VinaSun and Mai Linh have built a strong brand recognition in Vietnamese passengers... Banterle, A. , Carraresi, L & Cavaliere, A 2011, "What is the role of marketing capability