Question

What type of market structure does the online delivery sector belong to? Explain with a suitable reason.

Answer 1

• Few dominant firms: A small number of large platforms (platforms that capture most orders in a given geography) exert significant market power and influence each other’s pricing and strategies a core feature of oligopoly.
• Product/service differentiation: Firms compete by differentiating their apps and services (delivery speed, coverage, loyalty programmes, fees, restaurant partnerships), so competition is not just on price but on features and marketing matching characteristics of differentiated markets.
• Interdependence and non‑price competition: Because each platform’s moves (discounts, commissions, exclusive deals) affect rivals, firms closely watch and react to each other; heavy spending on promotion and service improvements is common.
• Barriers and scale/network effects: Multi‑sided platform economics (value grows with more users and more restaurants) create scale advantages that make it hard for many small entrants to displace incumbents reinforcing oligopolistic structure.