Introduction
When discussing the laundry services market in the US, it is necessary to compare it to each of the three characteristics of market structure: the number of companies, ease of entry and exit, and similarity of products. It is also essential to analyze how the laundry services market relates to each of these characteristics and finally, why this industry may be considered an example of market failure. The laundry services market in the US is a classic illustration of monopolistic competition, which is characterized by a moderate number of firms offering slightly differentiated products with ease of entry and exit. As a result, it is an example of a market failure due to a low differentiation level and moderate entry and exit ease.
Characteristics of a Monopolistic Competition Market Structure
Number of Firms
The number of firms in the laundry services market in the US is moderate, with both large chain stores and small, independent operators, for example, large chain stores such as Coin Laundry and Laundromats, as well as small, independent laundry services that serve local communities. This moderate number of firms is a key characteristic of monopolistic competition as it allows for a low level of competition but also limits the market power of any one firm.
Similarity of Products
The laundry market offers slightly differentiated products in terms of product similarity. While all laundry services offer the same basic services of washing and drying clothes, some offer additional services such as folding, ironing, and door-to-door pick-up and delivery. This differentiation in products allows for a level of competition, as customers can choose the laundry service that best fits their needs. However, it also limits the ability of any one firm to dominate the market, as customers have options.
Ease of Entry & Exit
The ease of entry and exit in the laundry services market is moderate. While it is relatively easy to start a small, independent laundry service, it can be challenging to compete with larger, established firms that have a strong brand and a loyal customer base. On the other hand, larger chain stores may face competition from new entrants due to the moderate ease of entry, as well as from existing firms that offer slightly differentiated products.
Industry as Market Failure
However, the industry can also be discussed as an example of market failure, as it does not provide an efficient allocation of resources. For instance, due to the lack of competition in certain areas, prices may be higher than they might be in a perfectly competitive market, and some consumers may not have access to laundry services at all. This market failure highlights the importance of government intervention to promote competition and ensure an efficient allocation of resources.
Conclusion
The laundry industry is one of the most necessary service markets in the US. However, its predominantly monopolistic nature urges changes in the industry to make it accessible for everyone. The government should control this industry to make its services equally available to all citizens. By doing so, the laundry service market will become possible to get rid of its failure status.