Oligopoly is that market structure where only few sellers or producers dominate the entire industry, in oligopoly the number of seller or producer is more than 1 and that is why it is not same as monopoly. Example of oligopoly include airlines, even FMCG companies can be included in oligopoly because strategy of one company is dependent on the action of other rival company. Given below are some of the characteristics of oligopoly –
- In an oligopoly market structure there are only few companies but they are large when it comes to the size of the companies.
- Oligopoly is characterized by companies selling same goods and services or slightly differentiated goods and services to the customers.
- There are so few companies in an oligopoly that action of company influences the decision of other company, in other words there is interdependence between the companies in an oligopoly. So for example if one company decides to decrease the price of a product, then other companies in the market will follow the other company.
- There are some barriers to entry in oligopoly which helps the existing companies in earning abnormal profits. However barriers to entry are not that much as in the case of monopoly market structure.