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Answer to Question #72138 in Microeconomics for nehal

Question #72138
can wholefoods sustain its dominant position in luxuury grocery market after merging with Amazon? (monopolistic conpetetion)
can whole foods-amazon sustain price discrimination powers associated with differences between online shopping channel (low price, low cost model ) and physical retailing channel (high price, high cost model) ?
Expert's answer
Can Whole Foods sustain its dominant position in luxury grocery market after merging with Amazon? (Monopolistic competition)
Answer
The merger between Whole Foods’ and Amazon brought about the transformation of grocery shopping. The main aim of the merger was to create the key trend of cross-platform selling. Therefore, the transformation was not meant to lower prices in the grocery market. In that connection, Whole Foods’ would most likely sustain its dominant position in this market after the merger.
Although most people anticipated low prices, cross band leveraging was the significant parts of the merger. The monopolistic competition of the Whole Foods will not change for that reason. Besides, the market is a luxury grocery market. Luxury products exhibit inelastic demand; therefore, an increase or decrease in the prices of luxury goods will negligibly affect the amount of quantity demanded. The grocery market of the Whole Foods’ will be sustained, implying that the monopolistic competition will not change.
Can Whole Foods-Amazon sustain price discrimination powers associated with differences between online shopping channel (low price, low-cost model) and physical retailing channel (high price, high-cost model)?
Answer
The Whole Foods-Amazon provide online grocery shopping which is aimed at providing products to customers at low prices and with efficient delivery. The merger noted that the claim that the price discrimination between the online and physical retailing comes from the bankrupt online grocery sellers who say that all the consumers want to touch and see what they are buying. Therefore, lowering of prices in the physical stores is part of the Whole Foods-Amazon merger. In addition, the merger does not create any obligation for customers to purchase their products from either store but instead create a hybrid, which would eliminate the discrimination. Thus, it would not sustain price discrimination powers linked to the online and physical stores.

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