>>reasoning on competition can be difficult to grasp...


I need your help. I was never that great at economics and decided to retake my GCSE in the subject, but I got caught by a couple of questions on the exam paper and I am still not sure why I got them wrong. I would be pleased for your thoughts on them. Here goes...

n Question one
Retailer A attempts to buy a large group of stores but the regulators fear the deal raises competition issues and demands that some outlets are sold. Retailer B buys a large group of stores but the regulators feel the deal raises no competition issues so it is waved through. What is the market share of Retailer A? Is it: 30%, 15% or 5%? What market share does Retailer B have: 30%, 15% or 5%?
Now, with my basic grasp of economic theory and competition law, I answered 30% for the first part of the question and 5% for the second part. But I was wrong. Apparently, Retailer A was Somerfield (market share: less than 5%) and Retailer B was Tesco (which has a market share of 30% and rising).
Do you have any ideas why? I did ask my teacher, but he wittered on about how you needed to look at local competition issues - not the national picture - when deciding whether stores should be sold. It all got a bit confusing and made no sense to me.

n Question two
Every piece of consumer research in the land shows that shoppers use different retail chains, store formats and a variety of sizes of store to buy their grocery items. As a competition regulator, do you look at this important market as a single sector where shoppers have complex buying habits? Or do you ignore the evidence and treat the market as three completely separate sectors that you arbitarily call supermarkets, mid-size and c-stores? Any thoughts? I said that clearly the clever regulatory people would take a broad view of the issues and look at the market as a whole to get a clear picture. Wrong again.

idiot’s guide to economics