RI H2 Promotion Examination - Examiner's Report 2020

ECONOMICS Higher 2 Syllabus 9757 Examiner’s Report Year 5 Promotion Examination 2020 Ra ffles Institution Nurturing the Thinker, Leader & Pioneer TEL: 65 6419 9888 ● FAX: 65 6419 9898 http://www.ri.edu.sg ● One Raffles Institution Lane, SINGAPORE 575954

Y5/9757/Promos/2020 2 © RI 2020 [Turn Over ECONOMICS Y5 H2 Promotion Examination 2020 Paper 9757/01 Paper 1 Case Study (a) (i) Explain the market structure that best represents ride -hailing services after the merger in Extract 1. [2] Suggested Answer: Identification The market structure is monopoly. Justification (Link it back to the characteristics of a monopoly) (i) There is only one dominant firm with a very high market share and the rest are small firms with insignificant shares. Evidence: “CCCS finds that Grab currently holds around 80% market share. Despite recent entry by several small players, their market shares remain insignificant.” (Extract 1) OR (ii) Very High BTE • Grab controls the factors of production i.e. the taxi drivers who are essential for its business. It would be difficult for a potential entrant to convinc e drivers to switch if the customer base of the new entrant is small. • Grab enjoys the network effect from its booking app which leads to customers remaining loyal to enjoy their rewards and shorter wait times since there are more drivers in Grab’s network compared to a potential entrant. Evidence: CCCS’s investigation found that strong network effects make it difficult for potential competitors to scale and expand in the market, particularly given that Grab had imposed exclusivity obligations on taxi companies, car rental partners, and some of its drivers. Grab’s exclusivities hamper the ability of potential competitors to access drivers and vehicles that are necessary for expansion in the market. (Extract 1) Mark Scheme - Identification – 1m - Justification - 1m Examiners’ Comments ­ Relatively well-done with most scoring at least 1m for the correct identification.

Y5/9757/Promos/2020 3 © RI 2020 [Turn Over ­ A number of students did not gain the second mark as they did not justify why it is a monopoly with links back to the characteristics of the market structure. They stopped short of mentioning that the remaining firms in the market were small and insignificant, and that there is only 1 dominant firm in the market after the merger. ­ Note that it is not good enough to say that Grab is a monopoly after the merger because it held the majority share in the market, as this can also be evidence of an oligopoly. ­ A small number did not respond to the post -merger scenario and case evidence on the market share and got the identification wrong. (a) (ii) Comment on how commuters could be affected by the merger above. [4] Suggested Answer: Consumers’ welfare could be negatively or positively impacted by the merger. Consumers would be