What is Oligopoly? Explain Characteristics of Oligopoly Market.
Answers
Definition: The Oligopoly Market characterized by few sellers, selling the homogeneous or differentiated products. In other words, the Oligopoly market structure lies between the pure monopoly and monopolistic competition, where few sellers dominate the market and have control over the price of the product.
Few Sellers: Under the Oligopoly market, the sellers are few, and the customers are many. Few firms dominating the market enjoys a considerable control over the price of the product.
Interdependence: it is one of the most important features of an Oligopoly market, wherein, the seller has to be cautious with respect to any action taken by the competing firms. Since there are few sellers in the market, if any firm makes the change in the price or promotional scheme, all other firms in the industry have to comply with it, to remain in the competition.
Thus, every firm remains alert to the actions of others and plan their counterattack beforehand, to escape the turmoil. Hence, there is a complete interdependence among the sellers with respect to their price-output policies.
Advertising: Under Oligopoly market, every firm advertises their products on a frequent basis, with the intention to reach more and more customers and increase their customer base.This is due to the advertising that makes the competition intense.
If any firm does a lot of advertisement while the other remained silent, then he will observe that his customers are going to that firm who is continuously promoting its product. Thus, in order to be in the race, each firm spends lots of money on advertisement activities.
Competition: It is genuine that with a few players in the market, there will be an intense competition among the sellers. Any move taken by the firm will have a considerable impact on its rivals. Thus, every seller keeps an eye over its rival and be ready with the counterattack.
Entry and Exit Barriers: The firms can easily exit the industry whenever it wants, but has to face certain barriers to entering into it. These barriers could be Government license, Patent, large firm’s economies of scale, high capital requirement, complex technology, etc. Also, sometimes the government regulations favor the existing large firms, thereby acting as a barrier for the new entrants.
Lack of Uniformity: There is a lack of uniformity among the firms in terms of their size, some are big, and some are small.
Since there are less number of firms, any action taken by one firm has a considerable effect on the other. Thus, every firm must keep a close eye on its counterpart and plan the promotional activities accordingly.
✔here is ua answer:
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Oligopoly is a market situation in which there are only a few sellers of a commodity. Under this, each seller can influence its price-output policy.
It is because the number of sellers is not very large and each seller controls a big portion of total supply.
Price-output policy of a firm does affect the rivals. The price which is fixed under oligopoly without product differentiation is indeterminate. In case of differentiated products, monopoly agreements are even less possible.
Characteristics:
1. Monopoly Power:There is a clement of monopoly power in oligopoly. Since there are only a few firms and each firm has a large share of the market. In its share of the market, it controls the price and output. Thus an oligopoly has some monopoly power.
2. Interdependence of Firms:
Under perfect competition there are so many small firms and no single firm is strong enough to influence price or output. So the firms do not care about the actions and reactions of other firms.
3. Conflicting Attitude of Firms:
Under oligopoly, two types of conflicting attitudes are found in the firms. On the one hand, firms realize the disadvantages of mutual competition and desire to combine to maximize their joint profits. This tendency leads to the formation of collusion
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