Describe the market structure for the supermarket industry in the UK. Give reasons for your answer.

The supermarket industry in the UK is typically described as oligopolistic, i.e. the market structure is that of an oligopoly. This is a situation where a few large, interdependent firms dominate. Interdependence refers to the way in which all the firms are affected by the price and output set by one another, hence prices tend to remain rigid, as is the case in UK supermarkets. Similarly, a common characteristic of this market structure is high barriers to entry, which, in this case, are the staggering economies of scale possessed by these supermarkets, allowing for such a low average cost and consequently for such low prices for consumers. Finally, in an oligopoly it is not common to see non-price competition, as we already know that price competition is held back by the constraints of interdependence. In the case of the supermarkets, loyalty cards, (e.g. TESCO Clubcard, Waitrose Card, Nectar Points, etc.), free home delivery, online ordering, and guarantees are all examples of the way in which they compete on a non-price basis.