Case04e - The motor vehicle repair industry has developed...

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A case study of Monopolistic Competition The motor vehicle repair and servicing industry The typical British small garage is stereotyped as untidy, messy, cluttered with hoists and equipment, with a few overall-clad figures working to the clatter of tools and blaring radio. This picture is quite different from that of the early years of the automobile. In those days, work on the car was the domain of the chauffeur or blacksmith, or the manufacturer if repairs were beyond both. This was to change following the Second World War. As the volume of cars grew so the motor repair sector began to expand, giving employment to the many mechanically trained ex- servicemen. The market grew so quickly that there was little chance of erecting entry barriers. For example, although there were moves to introduce specific (City and Guilds) qualifications for mechanics and thereby impose a degree of restricted entry on the industry, this was never fully established. The result is to be seen today.
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Unformatted text preview: The motor vehicle repair industry has developed into a good example of a monopolistically competitive industry. Some 20 000 workshops maintain and repair vehicles, three quarters of these employ less than ten staff and have an average turnover of little more than 150 000. The vehicle repair and servicing industry is diverse, being made up of general repairers, spet repairers (i.e. bodywork, electrics), dealers and petrol stations. With so many garages the industry has remained a highly competitive one. However, spem and locality enable the various garages to maintain a fairly constant degree of control over their price. Questions 1. What are the specific features of the motor vehicle repair industry that have restricted the growth of large-scale operations? 2. What other industries can you think of that exhibit similar characteristics? This box is based on A. Bollard, Small beginnings (Intermediate Technology Publications, 1983)....
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