An oligopoly is a market state where there is a limited amount of competition available for consumers to consider. When this structure is in place for an economy, then only a small number of producers, distributors, and sellers interact with the customer base to distribute items. In an oligopoly, there must be some barriers to entry to enable firms to gain a significant market share. These barriers to entry may include brand loyalty or economies of scale. However, barriers to entry are less than monopoly. Differentiated products. In an oligopoly, firms often compete on non-price competition. This makes advertising and the quality of the product are often important. Characteristics of Oli lf an Oligopoly. Firms have market power derived from barriers to entry. However, a small number of firms compete with each othercompete with each other. Each firm doesn’t have to consider the actions of otherconsider the actions of other firms, thus, behavior is interdependent. An example of an impure oligopoly is the automobile industry, which has only a few producers who produce a differentiated product. Measuring market or monopoly power via Concentration Ratios A concentration ratio measures only the first source of market power, lack of competition. A market form where there are only a few firms in the industry but there are many buyers. Seeing the graphs, we can see that Oligopoly is more benefical because With a relatively low price, much advertising and branding, we are confident that our innovative product, the T-Reader will be a hit amongst the CA studets. Oligopoly as a market structure is distinctly different from other market forms. Its main characteristics are discussed as follows: 1. Interdependence: The foremost characteristic of oligopoly is interdependence of the various firms in the decision making.
In an Oligopoly market structure, there are a few interdependent firms dominate the market. They are likely to change their prices according to their competitors. For example, if Coca-Cola changes their price, Pepsi is also likely to.
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