Perfectly competitive?

Question

Would the market for dry cleaning be perfectly competitive in large cities such as New York or San Francisco? Why or why not? How about in a small city such as Athens, Ohio, or Meredith, New Hampshire?

Answer 1

Dry cleaning markets in big cities are roughly perfectly competitive markets because they satisfy the following four requirements:

1) Very Large Number of Producers: the size of the city creates a big enough market to support a large number of producers

2) The Product is Standardized: Dry Cleaning is Dry Cleaning. There is no differentiation of service. If there is, it is negligible.

3)The Firms are Price Takers: Because there is so many Dry Cleaners in the area and competition is so stiff, the firms accept the price determined by the market. If one owner is charging ten dollars for his service and another is charging seven fifty, the customer will go to the cheaper firm. A market equilibrium develops.

4)Free Entry and Exit: The barriers to entry to this industry are minimal. There are no licensing requirements. Start up costs are very small. Anyone can start a dry cleaning business.

Answer 2

In San Francisco/New York: It would be perfectly competitive because there are many merchants that speciallize in the cleaning industry in those parts. You would either:

A.) have to make your product "better" in quality

or

B.) Differentiate your product from the other cleaning outlets

In order to seek higher revenues from the dry cleaning outlets. In New York, there's actually dry cleaners that will DELIVER your clothes to your place. Now that's innovative!

Athens, Ohio, Meredith: You stand to have less competition and quite possibly less profit because those are smaller cities. No matter what, if you haven't made a "new" invention and haven't pattened it, then you will ALWAYS face perfectly competitive markets.

I would recommend the dry cleaners or a FLORIST which would draw a lot of money in those parts.

Hope this helps!

Jerry- Economics Major; University of South Florida.