Coffee Wars

Coffee Wars: oligopoly, price wars, non-price competition and cartels for Edexcel IGCSE Economics

This free game is part of our Pearson Edexcel IGCSE Economics (4EC1) course for exams in EXAM YEARS 2027-2030.

Run one of the big three coffee chains

Coffee Wars is a free 3D game about oligopoly for Pearson Edexcel International GCSE Economics (4EC1). It covers specification point 1.2.4 (h), (i) and (j): the definition of oligopoly, its seven main features (few firms, large firms dominate, different products, barriers to entry, collusion, non-price competition and price competition), and its advantages and disadvantages: choice, quality, innovation, collusion and cartels fixing high prices, and price wars between oligopolies.

You are the new strategy chief at Ember Coffee, one of only three big coffee chains in the country. In every town square your rivals Kova and Grindhouse are right next door. Shoppers stream into the square and you can watch each one choose a shop. A share figure floats over every shop, and each one has a station-style split-flap board showing its price. Leo, Ember’s strategy director, explains each idea as it happens.

Level 1: start a price war and watch your rivals answer

In Merrow you learn that a market dominated by a small number of large firms is an oligopoly: not one firm, like a monopoly, and not lots of small firms. The three chains sell nine in ten of the coffees, and Dot’s little coffee cart gets the rest. Press CUT PRICE and Ember’s board clacks down from £3.20 to £2.90. The crowd swings towards Ember… until Kova and Grindhouse match the cut within seconds and the shoppers drift back. That is price competition, and it shows why every firm in an oligopoly has to think about how its rivals will react.

Keep cutting and the rivals start going below you. The coin that pops up on every cup you sell shrinks from £1.60 profit to just 40p, and Dot’s Cart, a weaker firm that can’t sell this cheaply, pulls down its shutter for good. That is a price war: shoppers enjoy low prices at first, but the firms make small profits or losses, weaker firms close and consumers are left with less choice.

Level 2: win shoppers without cutting your price

In Hollins the price stays at £3.20, and you compete in other ways instead: non-price competition. An ADVERT puts Ember’s billboard on the roof and banners on the front. A NEW DRINK launches the Smoked Maple Latte with a giant cup over the door, a piece of innovation paid for by big profits. QUALITY adds another barista, armchairs and better beans. The rivals answer every move, but only after a while, and each launches its own version of the new drink. That shows different products: similar but not identical, each with its own brand. Reach 45% of the shoppers without cutting your price and you have seen the advantages of oligopoly for consumers: more choice, better quality and new ideas.

Level 3: barriers to entry and a secret deal

In Ashby a new firm, Fresh Pot, wants the empty shop on the square. Tap its van to see the bill: a shop lease and fit-out, coffee machines and the advertising needed to compete with the big three come to £730,000 in the first year, against savings of £60,000. These barriers to entry, high start-up costs and big marketing budgets, protect the big firms, but they also keep out new firms with new ideas.

Then Kova’s and Grindhouse’s bosses suggest that all three chains charge £4.50 a cup. That is collusion, and a group of firms that agree to fix prices or limit output is a cartel. You decide whether to join. Either way you see what a cartel does to consumers: prices clack up, shoppers grumble or walk past without a coffee, and the price fixers are fined, because collusion is against the law in many countries.

Level 4: Coffee Wars in Kingsport

The final level is a 90-second score chase in the busiest square in the country. Every move is open, and Kova and Grindhouse make moves of their own. When a rival cuts its price you choose: match it and risk a price war, or fight back with non-price competition. Price cuts get copied fast. Adverts, new drinks and better quality cost a little money and take time to recharge, but the shoppers they win stay longer. Your score is Ember’s profit, and your best score is saved so you can play again and beat it.

Everything is taught before you are tested on it. Four quick checks use the exam’s own style, including the lesson’s airline question on identifying the features of an oligopoly and a 3-mark question on the disadvantage of a cartel to consumers. Every wrong answer brings up a short explanation with a “Why not?” and a link to the lesson. The game takes about 9 minutes, works with a mouse, a touch screen or the keyboard, needs no login and runs on school Chromebooks.