Oligopolies Definition

An oligopoly is a market structure in which there are only a few firms. The word “oligopoly” comes from the Greek words for “few” and “selling.” In an oligopoly, firms compete with each other, but they also recognize that their actions have an impact on the other firms in the market.

There are several characteristics of oligopolies:

There are only a few firms in the market. This means that there is not a lot of competition, and each firm has some control over the price of the product.

Firms in an oligopoly may produce similar or identical products. For example, there are only a few firms that make automobiles or computers.

Firms in an oligopoly may be located in different parts of the country or world. For example, Saudi Arabia and Russia are both oil-producing countries, but they are not located in the same part of the world.

Firms in an oligopoly often have barriers to entry, which prevent new firms from entering the market. These barriers may be economic, such as high costs of production, or legal, such as patents or government regulation.