oligopolievorming

Oligopolievorming is the process by which a market shifts toward an oligopoly, a market structure dominated by a small number of large firms that together hold a substantial share of sales. In an oligopoly, each firm's decisions about price and output depend on the expected responses of rivals. Oligopolies can involve homogeneous products (like steel) or differentiated goods (like smartphones or airlines), and they sit between perfect competition and monopoly in the spectrum of market structures.

Several factors encourage oligopolies. Significant barriers to entry—such as high capital requirements, control of essential inputs, economies of scale, network effects, or regulatory obstacles—make it costly for new firms to compete. Mergers and acquisitions can reduce the number of competitors. Strategic interdependence arises when firms anticipate rivals' reactions, leading to concentrated market power even without explicit collusion.

Competitive behavior in oligopolies often involves interdependent pricing and output. Firms may compete on non-price dimensions like product quality or service. Pricing may exhibit rigidity; tacit or explicit collusion can occur. Common theoretical models include Cournot (competition in quantities) and Bertrand (competition in prices), with outcomes that depend on cost structures and the number of firms.

Implications and policy: Oligopolies can achieve efficiency through scale or innovation, but they may also raise prices or limit output, reducing consumer welfare. Antitrust and competition authorities monitor for anti-competitive conduct and can enforce remedies to maintain rivalry. In some sectors, natural oligopolies are regulated rather than broken up.