Economics - Oligopoly and Features of Oligopoly | 11th Economics : Chapter 5 : Market Structure and Pricing
Chapter: 11th Economics : Chapter 5 : Market Structure and Pricing
Oligopoly and Features of Oligopoly
Oligopoly
Oligopoly
is a market situation in which there are a few firms selling homogeneous or
differentiated products. Examples are oil and
It
is difficult to pinpoint the number of firms in ‘competition among the few.’
With only a few firms in the market, the action of one firm is likely to affect
the others.
Features of Oligopoly
1. Few large firms
Very few
big firms own the major control of the whole market by producing major portion
of the market demand.
2. Interdependence among firms
The price
and quality decisions of a particular firm are dependent on the price and
quality decisions of the rival firms.
3. Group behaviour
The firms
under oligopoly realise the importance of mutual co-operation.
4. Advertisement cost
The
oligopolist could raise sales either by advertising or improving the quality of
the product.
5. Nature of product
Perfectoligopolymeanshomogeneous
products and imperfect oligopoly deals with heterogeneous products.
6. Price rigidity
It implies
that prices are difficult to be changed. The oligopolistic firms do not change
their prices due to the fear of rivals’ reaction.
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