Oligopoly

An oligopoly is a market structure in which a small number of companies, usually a handful of large firms, dominate the industry and have significant control over the supply and prices of the products or services they offer. In an oligopoly, companies interdepend in their strategic decisions, meaning they must take into account the actions and reactions of other firms in the market when making decisions regarding prices, production, and marketing strategies.

Key characteristics of an oligopoly include:

1. Small Number of Companies: An oligopoly involves the presence of a limited number of firms, often a few large companies, that dominate the industry.
2. Interdependence: Companies in an oligopoly are closely linked in terms of their business decisions. For example, if one company lowers its prices, others may be compelled to do the same to avoid losing market share.
3. Barriers to Entry: Barriers for new companies to enter the market are typically high in an oligopoly. This can include significant entry costs, economies of scale that favor existing firms, and control over key resources.
4. Price Control: In an oligopoly, companies have a significant degree of control over the prices of their products or services and tend to avoid fierce price competition.

In some cases, companies in an oligopoly may attempt to reach secret or public agreements to coordinate their actions and avoid competition. This is often considered anticompetitive and may be illegal under antitrust laws.