In a perfect competitive market, all market participants, both consumers and producers, are price-takers (Sayre, 2013, p. 330). To be considered a perfect competitive market all firms sell and identical product, are price takers, have a relatively small market share, buyers know the nature of the product being sold and the prices charged by each firm, and the industry is characterized by freedom of entry and exit (Perfect Competition, 2013).
The nail salons in my area are in perfect competition. They all offer beauty services primarily of nail care like manicures, pedicures, and nail enhancements as well as eyebrow trimming and waxing. There are many nail salons in my area as well as all over the United States and other countries. They all offer a standardized service of nail care. Barriers to entry in the nail care services are small (Taulli, T, 2009, para 8). The beauty salon industry is massive therefore not one particular salon would have all the market power where they will affect the market price.
I honestly do think that nail salons aren’t price takers. A price taker is a seller that has no control over the price of the product it sells (Tucker, I. 2010, p. 200). I think that they actually do set their own prices depending on the specific area. I am presently in New York where a full set is anywhere from $25 to $45 whereas in Pennsylvania a full set can range from $15 to $25. The salons do compete using the prices. I notice that when a nail salon opens up they will have their prices a lot lower than the other salons in the area. Once they establish enough business they may raise their prices but not by much. They retain their customers by keeping the prices low.
I was a little hesitant about whether the nail salons offer a standardized good. Yes, there are many nail salons and yes they offer the same services. My hesitation came from the fact that some nail salons offer more services than just nail care like hair care services.
The market is regulated by the government. In a nail salon the person giving the care has to be licensed to do it. Also a nail salon may rent stations to the stylist, which could possibly cause some tax problems as to whether the IRS may consider the stylist an employee or a contractor (Taulli, T, 2009). They also must maintain a clean establishment and display their sanitation card rating.
As you can see the nail salon business has a lot of potential in the right areas. As long as they can attract customers and provide great service they will have great revenue. As a consumer, I must say that I love a nail salon that charges a decent price for a full set or manicure (no more than $30) and has a nice and friendly environment where I can relax and receive my beauty services!
References
Perfect Competition. (2013). Retrieved from http://www.investopedia.com/terms/p/perfectcompetition.asp#axzz2M46Zskqc
Taulli, T. (2009, July 15). How to Value a Beauty Salon. Forbes. Retrieved from http://www.forbes.com/2009/07/15/beauty-salon-valuation-entrepreneurs-finance-taulli.html
Tucker, I. B. (2010) Economics for Today. 6th ed. Mason, OH: Cengage Learning.
LeChat, F. (1999-2013). Beauty Salon Rules and Regulation. Ehow, Retrieved 2013, February 27 http://www.ehow.com/list_6193220_beauty-salon-rules-regulations.html 