Group Assignment 3A – Screencast

Video Presentation
ECON1268 - Managerial and Business
Economics

Lecturer: Dr Ronald Kumar

Team members:
Le Thuy Linh - s3877435
Nguyen Nhu Trang - s3877519
Cao Phan Trung Kien - s3877876
Tran Thanh Luan - s3870996
Huynh Tan Dat - s3891989
Table of contents

01. Monopoly 03. Russia – Ukraine War

Analysis of Indian Railway Catering and Game setting, hypothetical pay-off, and
Tourist Corporation comparison to reality

02. Imperfect Competition 04. Industry Talk

Analysis of Indian E-commerce industry
 Monopoly
01 Analysis of Indian Railway Catering and Tourist Corporation
Huynh Tan Dat

Indian Railway Catering and Tourist Corporation (IRCTC)

● A subsidiary of the Indian Railway established by the Ministry of Railways (Business Standard
n.d.). ​
● Entering the primary markets in October 2019 and enjoys a strong monopoly of 100% market
share in rail network (mint 2021).
● RCTC possesses is the monopolistic authority granted by the Indian Railways to the company
(Bansal 2021) to be only in: ​

○ Being authorized to sell railway tickets online. ​

○ Distributing packaged drinking water across all stations and trains in India.

○ Being authorized to provide catering services in trains.

Huynh Tan Dat

Profit maximizer and Barrier to exit

● IRCTC functions just like any other business, trying to maximize its revenue & profits (buildd
2022).​
● Any payment/travel company must be willing even if it doesn't want to comply with the price
changes as IRCTC has a complete monopoly in the rail ticket business (India Railways 2014). ​
● However, IRCTC also faces the burden of being influenced or controlled by the government,
which is a barrier to exit. Because of that monopoly, Indian government suddenly announced it
would take 50% of the utility fee revenue from IRCTC (Outlook 2021).
Huynh Tan Dat

Optimal quantity to produce and price to sell

A company's profit by given quantity is

determined by its total revenue minus its total cost:
Huynh Tan Dat

Optimal quantity to produce and price to sell

In theory, identifying the optimal quantity is to
maximize profit, which means that the marginal
cost equals the marginal revenue (Brown et al.
2019)

⇒ The intersection of MC and MR the profit

maximizing quantity.​
⇒ Aligning it to Demand curve, where the price
corresponds with optimal quantity Q’, which is
monopoly price.
Huynh Tan Dat
Optimal quantity to produce and price to sell
Figure 1. View India's Train Passenger Trend from 2007 to 2019
(Cheema 2019).​
The number of passengers taking the train increases
every year, a very high volume of seat and berth
reservations daily (trainman n.d.), even though the
limitation of each ID can only book 12 tickets per
month (Sharma 2022).​
Figure 2. The summary of Balance Sheet for IRCTC’s financial
report from 2018 to 2022 (in Rupee Crone- currency of India)
(Money control n.d).​
From IRCTC’s annual financial report, company still produces at a point
where revenue is much higher than the cost from the profit they earn in a
year.​
⇒ IRCTC might be producing at the profit maximizing level where
MR=MC​.
Huynh Tan Dat

Price discrimination
● In theory, monopolists can decide the price by
themselves to sell and increase profit (Coase 1937).​
● In 2021, IRCTC imposes a lesser convenience fee of
Rs 10 plus GST per non-AC class ticket and Rs 20
plus GST per AC class ticket for online ticket
purchases made via Bharat for Money Interface
(BHIM) or Unified Payments Interface (UPI) (Aryan
2021).​
● There are nine classes of seats on Indian Railways.
These carriages may be categorized as air-
conditioned or non-air-conditioned. Carriages with
air conditioning are cleaner, safer, and more pleasant
than those without air conditioning (Train Spread
n.d.). In other word, passengers have to pay a higher
amount for a better trip experience.
Huynh Tan Dat

Price discrimination
There are some reasons (Indeed 2022):
● Improves profits: Price discrimination typically
increases the profit of IRCTC by optimizing overall
revenue.​
● Enhances client satisfaction: Passengers often
associate a greater price with a better customer
service experience. ​
● Focuses on fundamental market sectors:
Monopolies are encouraged by price discrimination
to promote their goods and services to certain
demographic groups.
● Empower customers: Price discrimination may
empower passengers since they may be able to pick
the price they pay for a ticket. It enables buyers to
prioritize price, quality, and other factors of their
choices.
 Imperfect Competition
02 Analysis of Indian E-commerce industry
Cao Phan Trung Kien

1 2 3
Oligopoly Types of Game theory of the
market Competition Berdant model
• First sign – Few firms take • Price
control​ competition
• Second sign – High entry
• Service
barrier
• Third sign – Mutual differentation
Interdependence
• Last sign –
homogenous products
Cao Phan Trung Kien

Oligopoly market • An oligopoly has a few firms

a. First sign: few firms take control have powers to dominate and
control (Hubbard, Garnett
and Lewis 2015)​
• The power is reflected in
market share​
• Indian E-commerce market is
dominated by:​
 Walmart INC (41.5%
market share)​
 Amazon.com INC
(31.9% market share)​
 These two firms is occupying
73.4% E-commerce market
share, measured in retail sales.​

(Euromonitor International n.d.)​

Cao Phan Trung Kien

Oligopoly market
b. Second sign: high entry barrier
The top two companies are so powerful in the market.
⇒ The entry  barrier is high for new firms.

c. Third sign: mutual interdependence

The biggest players in the industry are increasingly colluding with each other
⇒ Extending their online appearance and enhancing sales (Euromonitor International 2021).

This is a sign of mutual interdependence

Cao Phan Trung Kien

Oligopoly market
d. Last sign: homogeneous products
• Online consumers trust comparison websites to
decide to purchase from the platform that​
 Provides the highest value​
 Charges the lowest price (Euromonitor
International 2021).​
• Noted that the pressure of buyers’ power is the
highest in forces to compete between firms ​
 The online shopping services from the
biggest firms in India are homogenous​
 Buyers can substitute buying from one
marketplace to buy from the other to get
the cheaper one.

(MarketLine 2021)​
Cao Phan Trung Kien

Types of Competition
a. Price competition
• Competitive pricing strategy (keep the price as low as possible for consumers) is both applied to ​
 Amazon.com ​
 Flipkart (the main online retail unit controlled by Walmart) (Market Line 2021)​
⇒ The top firms are competing on prices​
• Some calculations will be made to clarify:​
 Assuming aggregation sales unit of Indian E-commerce market is one billion.​
 Market share on retail sales: Amazon.com (41.5%) and Walmart (Flipkart: 31.9%).​
 Use real revenue data to calculate the price.​
 Use real cost of goods sold to calculate marginal cost.
Cao Phan Trung Kien

Types of Competition
a. Price competition (Flipkart India
• The tables show that both firms are charging Private Limited
their price lower than marginal costs​ n.d.)
⇒ Resulting in losses​ (analysis done in
• Looking at the percentage residual between Excel)
price and marginal cost​
 %Residual(Amazon.com) = -52%​ (Flipkart India
 %Residual(Flipkart)= -12%​ Private Limited
⇒ Amazon.com is more negative so that their loss n.d.)
is more significant.​ (analysis done in
• However, Flipkart is still existing because:​ Excel)
 Its mother company’s market power is
greater ​
 They have services differentiation
compared to Amazon
Cao Phan Trung Kien

Types of Competition
b. Service differentation

(Jooste 2018)
Cao Phan Trung Kien

Types of Competition
Customer service differentation
• Flipkart provides a better customer service​
 More complete and detailed topics that customers
usually care​
 Break down to small subtopics by list of questions.​ (Amazon.com n.d.)
• Meanwhile, Amazon.com​
 Proposes less suggested consideration​
 Requires to log in to be provided instruction​
⇒ Less preferred than Flipkart for first users.

(Flipkart n.d.)
Cao Phan Trung Kien

Game theory of the Berdant model

a. Betrand model game theory matrix
Walmart  (41.5% market share)

P(W)>MC(W) P(W)<MC(W)

Amazon.com P(A)<MC(A) -10;14 -10;-14

(31.9% market MC(A)<P(A)=P(
share) 10;14 10;-14
W)
P(A)>P(W) 0;24 0;-24

 Betrand model game theory matrix​

 Russia – Ukraine War
03 Game setting, hypothetical pay-off, and comparison to reality
Le Thuy Linh

Game settings

● Type of game: Game of

chicken
● Players: Russia and
Ukraine
● Strategy: Peace or
Aggression
Le Thuy Linh
Country Pay-off Interpretation

Game matrix 7
Permanent territorial gain, dominant players and can dictate
terms and conditions to the West
  Russia
Demilitarized respect for the sovereignty and territorial integrity
Peace Aggression 6
of Ukraine
Russia
Crisis and subsequent sanctions result in market loss for Russia
3
 Peace

6 7 economy
Ukraine

6 1 1 Secure its territorial integrity, sovereignty membership in NATO

Allow the missile defense system to be deployed close to its

7
border
Aggression

1 3
6 Compromise on some policies that align with Russia's interest
Ukraine
7 3 3 Internal/External threat of Russia, lose Crimea

Compromise its territorial integrity, sovereignty, membership

1
of NATO

Table 1. Pay-off matrix (Global Conflict Tracker 2022)

Le Thuy Linh

Nash equilibrium
  Russia
Peace Aggression
Dominant
Strategy

 Peace
6 7
6 1
Ukraine

eq Nas
uil h
Aggressio

1 3 ib r
ium
n

7 3

Dominant
Strategy
Nguyen Nhu Trang
Outcome discussion of the real war
1 3
Past
Intensive attack that resulted in
confirmed deaths of 6,000
civilians and 9,000 army
personnel in Ukraine, along with
25,000 army personnel in Russia
(Hayda et al. 2022)​.
No sign of cooling down (Yuhas
2022)
Aggression - Aggression
Future
2 Losses will continue,
making both sides come to
an end (Deliso 2022).​
Present
Putin wants to "end the
conflict as soon as
possible" but Ukraine
disagrees (Khanh 2022).​
Russia: Peace
Peace - Peace
Ukraine: Aggression
04 Industry Talk
Tran Thanh Luan

Consumers' choices and their behaviors​

4 dimensions that illustrate the customer's decisions:​

1 3
Who is our How they shop
shopper 2 the category 4
Where they Why people
buy the consume the
category category
Tran Thanh Luan
Tran Thanh Luan

Product
Instead of asking
“What is in this Ask “What is this bottle
bottle?” doing for me?”
Tran Thanh Luan

Promotion and Price

Tran Thanh Luan

Things we would like to hear more

About how companies collect information from customers

⇒ then analyze and take action towards the reliable data that they have collected​
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Statement of Authorship