Question

Oligopoly and its cheif feature and type in

Answer 1

Oligopoly refers to the market structure in which there are a few sellers, dealing in homogeneous or differentiated products.

Types of oligopoly

1. Pure/Perfect Oligopoly - When firms in an oligopoly market deal in homogenous products, it is called a pure oligopoly. For example, market of aluminium, cement, steel, etc.
2. Imperfect Oligopoly - When firms in an oligopoly market deal in differentiated products, it is called an imperfect oligopoly.
3. Collusive Oligopoly - When firms in an oligopoly market agree to work together in deciding the market supply or price determination, it is called a collusive oligopoly.
4. Non-Collusive Oligopoly- When firms in an oligopoly market decide to compete with each other in deciding ,market supply or price of the product, it is called non-collusive oligopoly.

Characteristics of Oligopoly

•  Interdependence : Thus there is complete interdependence among the sellers with regard to their price-output policies. Any change made by a particular firm in their product or price, will get reaction from the other firms in the market.
• Group behaviour : The firms in an oligopoly behave like a group. All firms have similar prices and similar products, and any changes made by one firm is adopted by the other firms as well. Hence, the firms have a group behaviour while still retaining their own identity.
• Price rigidity : The firms are in a position to influence the price but do not do so for fear of price war. Instead, they use methods like free gifts, discount, etc. to attract customers. They use non-price competition in an oligopoly.
• Few Firms : There are only a few firms in an oligopoly market, selling similar but differentiated products. There exists severe competition among these few firms.
• Barriers to entry : There are various barriers to entry in an oligopoly market. Lack of huge capital, not availability of essential raw materials,etc. are some of the reasons why there are only a few firms.
• Intermediate demand curve : Since the behaviour of oligopoly firm cannot be ascertained, it is not possible to draw a demand curve. As a result, there is an intermediate demand curve in an oligopoly.

Answer 2

Answer:

An oligopoly is an industry which is dominated by a few firms. In this market, there are a few firms which sell homogeneous or differentiated products. Also, as there are few sellers in the market, every seller influences the behavior of the other firms and other firms influence it.