Characteristics of Oliogopoly
1. Few sellers: Oligopoly markets are characterized by a small number of firms dominating the industry. These firms have a significant market share and often control the majority of the market supply.
2. Interdependence: Due to the small number of firms in the industry, each firm's actions have a significant impact on their competitors. Firms in an oligopoly must consider the likely response of their rivals when making strategic decisions such as pricing and advertising.
3. Barriers to entry: Oligopoly markets often have high barriers to entry, making it difficult for new firms to enter and compete in the market. These barriers can include economies of scale, high capital requirements, or government regulations.
4. Product differentiation: Firms in an oligopoly often engage in product differentiation to distinguish their products from those of their competitors. This can be done through branding, product features, or marketing strategies.
5. Price rigidity: Oligopoly markets tend to have stable prices, as firms are reluctant to change prices due to the potential reactions of their competitors. Price wars can be detrimental to all firms involved, leading to a focus on non-price competition.
6. Non-price competition: In addition to competition on price, firms in an oligopoly often compete on factors such as product quality, customer service, and marketing. This can lead to innovation and differentiation in products and services.
7. Collusion: In some cases, firms in an oligopoly may collude to restrict competition and increase profits. This can take the form of price-fixing agreements or market-sharing agreements, which are illegal in many countries.