Goseeko blog

What is Oligopoly?

by Team Goseeko

In oligopoly there are a small number of firms in the market. As per the norms, oligopoly consists of 3 -5 dominant firms. The firms can compete with each other or collaborate to earn more profits. Here the buyers are more than the sellers.


  1. Existence of few sellers: the primary features of oligopoly is the existence of a few sellers who dominate the entire industry and influence the prices of each other. Also there are large number of buyers under oligopoly.
  2. Identical or differentiated products: An important characteristic of oligopoly is the production of identical products or differentiated products.
  3. Barriers in entry: Another important characteristic of oligopolistic competition is that organizations cannot easily enter the market; nor can they make an exit from the market.
  4. Enhanced role of government: Under oligopolistic market structure, the government has a greater role as it acts as a guard since it is observed that oligopolists may engage in the illegal practice of collusion, where they together make production and pricing decisions.

Oligopolists may start acting as a single organization and further increase prices and profits. Thus the government is required to keep a watch on such activities to curb the illegal practices.

  1. Mutual interdependence: Under oligopoly market structure, a few numbers of sellers compete with each other. Thus  mutual interdependence refers to the influence that organizations create on each other’s decisions, such as pricing and output decisions.
  2. Existence of price rigidity: Under oligopolistic markets, organizations do not prefer to change the prices of their products as this can adversely affect the profits of the organization.

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