Oligopoly

Description of Oligopoly. Explanation.

Join our management communities


Full Name:*
Company:
Street + nr:*
City:*
State:
Postal Code:*
Country:*
E-mail:*	(This will be your username)
	I agree to the Terms of Service.

Definition Oligopoly. Description.

An Oligopoly is the market situation or structure in which a small number of producing and selling companies supply a high percentage of the market.

Typical for oligopolists is that the decisions and strategies of one firm influence, and are influenced by, the decisions of other firms. As a result, the firms operate economically under imperfect competition. This typically gives them the possibility to make pricing agreements and/or reduce production (Cartel). When one firm has a dominant position in the market the oligopoly may experience price leadership. The firms with lower market shares may simply follow the pricing changes prompted by the dominant firm. On the other hand, sometimes competition between sellers in an oligopoly can be fierce.

As a rule of thumb, when the four largest firms in an industry have a total market share of more than 40%, the four companies making up this market share are considered oligopolists.

The term should not be confused with Oligopsony: the market situation or structure in which the number of buyers are small and powerful.

As a result of fierce competition, in developed countries oligopolies can be found in many sectors. Examples of oligopolies include the aircraft, cellular phones, computer chips, cars, cigarettes and detergents industries.

Forum

Recent User Comments

    			 
  			   Helen Arias - Philippines
  	       
  		     Oil Industry
  	  		 "Question: Is the oil industry considered as an example of oligopoly?

Thank you."
  			   
    	  		 5

    			 
  			   Kedisha - Trinidad
  	       
  		     Oligopoly Examples
  	  		 "I am looking for some examples of oligopolies. Thanks..
"
  			   
    	  		 5

Comment on this Page

Return to Management Hub: Finance & Investing | Marketing | Strategy | Supply Chain & Quality

More on Management | Return to Management Dictionary |

End of description Oligopoly. An explanation.

                     
                      ● Karl (Germany)
                      
                    Oil Industry: Oligopoly?
                    "Yes. there are just a handful of large firms such as Shell, Exxon etc who are dominating the market."