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Oligopoly and Possible Collusion in the UK Domestic Utilities Market - Research Paper Example

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This paper analyzes the domestic utility market in the UK, the organizations involved in providing domestic utilities. The paper attempts to evaluate whether the rise in the price of utilities in the domestic utility market in the UK is a result of oligopoly and possible collusion in the market. …
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Oligopoly and Possible Collusion in the UK Domestic Utilities Market
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Download file to see previous pages Domestic utility market in the UK is a vast and diverse sector of the UK economy. It includes a number of companies that provide energy and other utility services. The UK utility market comprises of; the oil, petroleum and gas; nuclear power and coal; water and waste management; renewable energy industries; and energy conservation organizations. The utility market in the UK plays a significantly important in the economy of the country. The sectors of the market are highly important in the day to day operations of domestic life and if any of the utilities mentioned above becomes unavailable, it can have severe consequences on the domestic life in the UK and ultimately on the economy of the country.
Since the utility market has entry barriers due to the nature of the resources that are used in the provision of the services, the number of companies and firms operating in the utility market is less as compared to other industries in the UK (Simmonds 2002). The customers, markets traditions, products and knowledge required in order to succeed in the utility market in the UK are considerably different than those required in other industries. In other industries, the main objective of the companies is to succeed by way of earning more and more profit. The entry in other commercial industries is comparatively easier, therefore, the number of firms in other industries is high. The competition within an industry is determined by the number of firms and the availability of substitutes in the market, and the level of prices is determined by the extent of competition in the industry. Therefore in the commercial industries, the prices of products are determined by the extent of competitiveness of the industry. This situation is completely different from that of the utility market. Utility market has a fewer number of companies in the market, therefore, there is a clear tendency for high prices for the utility services, therefore, regulatory authorities play an important role in the utility market in order to ensure that the prices of services provided to the citizens are reasonable (Simmonds 2000).
Even though the utility market is different from commercial, industrial and residential markets; it is considered a big sector in the UK economy. From the perspective of revenue, the UK utility industry forms a significant proportion of the overall economic growth of the country. In the year 2010, the UK utilities industry had a total revenue of $126.3 billion. The most successful segment in the UK utility industry is the electricity segment. The total revenue of the electricity segment was $57.6 billion. It has been anticipated that the industry will continue to grow and the overall value of the UK utility industry by the end of the year 2015 will be $182.9 billion.
The domestic utilities are highly essential and they are used in all the homes. Therefore the market has guaranteed consumers.   ...Download file to see next pagesRead More
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