Food-+Hanqi,+Winnie,+Alvin,+Yiwen,+Rachel

The Fast food industry is an Oligopolistic market. There are many sellers [1] in the fast food industry, where there are a few large firms and many smaller firms working on the periphery of an oligopolistic market. There are substantial barriers to entry as there is : 1. High setup costs : where fast food restaurants require entry cost, location, capital cost and licensing 2. Firm created barriers : advertising and brand image creation, E.g. consumers feel that MacDonalds sells the best McSpicy burger. 3. Predatory Pricing or Limit Pricing : where the large firms can temporarily price its products below its average costs in order to deter entrants our of business. Firms also produce differentiated products: KFC is well known for its crispy chicken, MacDonald’s is well known for its Big Mac, Super Dog for its hotdogs and Fish & Co for its Fish and Chips.
 * __ Food industry: Fast food (so what's the market structure?) __**
 * Features:**

Firms engage in non price competition, which is research and development and advertising. Research and Development includes process innovation and product innovation. Process Innovation is where a firm is able to devise new ways to lower the cost of production and Product innovation is where firms would develop new and better products, to further differentiate their products and resuly in a demand curve with PED<1. Example on Process innovation is like MacDonalds and Burger King, where they have division of labour and equipments to aid this devision of labour. As workers are specialised in a certain area such as preparing the ingredients, making the burger, frying the fries, etc, this would increase the efficiency of labour and thus resulting in lower unit cost of production. Examples on product development include increasing the opening hours of MacDonald’s to 24 hours, and Subway coming up with the Singapore flavour sandwich during the National Day period so as to garner consumers because of their patriotism and curiousity. Examples on advertisements done by fast food restaurants:
 * Behavior: (good points so far, but i feel there is room for expansion? Think this is something interesting wrt to your industry. =)) **







These advertisements help to increase the demand for the advertised products, hence creating brand loyalty between the firms and the consumers. Hence, the demand curve becomes less price elastic and consumers are less likely to switch to other products from other firms when the price of the product increases. Hence, firms are able to increase price of products and this will lead to a less than proportionate decrease in quantity demanded, hence increasing revenue and increasing market share of that oligopolistic firm.

It is possible for Fast Food firms to invest in Research and Development because being and oligopolistic market with few large firms and many smaller firms working on its periphery, because they are able to earn supernormal profits in the short run and maintain in the long run. Hence this profits earned are channelled to come up with innovations that would further differentiate their products and/ or to help them lower cost of production. Case Study of McDonald's competition faced in the market : []

In recent years, however, McDonald’s has taken a much more consolidated approach by focusing on fewer restaurant openings and instead investing in the re-imaging of its current estate. This investment strategy is intended to maintain the perception of McDonald’s as a modern, progressive company and enable us to upgrade the customer experience and maintain market share in an ever-increasing competitive environment.

McDonald is investing in funds to ensure environment sustainability to ensure that whatever sources they get their food from it is ethical and sunstainable. ([])
 * Performance: (find articles/ information to show if the firm is indeed engaging in R&D/ making profits/ losses/ any firms left/ is leaving the industry?) **

Fast Food Restaurant Firms are dynamic efficient because they have the funds from their supernormal profits to invest in Research and Development. However they are inequitable, and static inefficient. Taking KFC as an example, they set prices higher than AC so tht they would get a profit. So a franchised firm in China will only cater to the demand of those who can afford it and are willing to buy it Whereas those who are willing yet unable to pay for it will be rationed out of the market hence being inequitable. For static efficiency, firms like Burger Kings are not allocative efficient and productive efficient.

[1] Fast food restaurants consist of MacDonald’s, Burger King, KFC, Subway, Popeyes, Wendy’s, Carl Jr’s, Super Dog, Fish & Co, Long John Silvers, Pizza hut, Texas Chicken, Domino’s Pizza.