oligopolin

Oligopoly is a market structure characterized by a small number of firms that dominate an industry. These firms are interdependent, meaning that the actions of one firm can significantly impact the others, and vice versa. This interdependence often leads to strategic decision-making, where each firm considers the likely reactions of its competitors when formulating its own pricing, output, or marketing strategies.

Key features of an oligopoly include a limited number of sellers, high barriers to entry that make it difficult for new firms to join the market, and a high degree of product differentiation or homogeneity. Products can be very similar, as in the case of oil or steel, or differentiated, as in the automobile industry. The concentration of market power among a few firms means that oligopolies can influence market prices, though they are not necessarily price setters in the same way a pure monopoly is.

Collusion, where firms agree to set prices or restrict output, is a potential outcome of oligopolistic markets, though it is often illegal. Firms in an oligopoly may also engage in non-price competition, such as advertising or product development, to gain market share. Examples of industries often cited as oligopolistic include telecommunications, airlines, automobile manufacturing, and the soft drink industry. The behavior of firms in an oligopoly is a central topic in the field of industrial organization economics.