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Forms of Market Structure-OLIGOPOLY

By :    April 7, 2021

Forms of Market Structure-OLIGOPOLY

  • The term Oligopoly means ‘Few Sellers’. An Oligopoly is an industry composed of only few firms, or a small number of large firms producing bulk of its output.
  • Since the industry comprises only a few firms, or a few large firms, any change in Price and Output by an individual firm is likely to influence the profits and output of the rival firms.
  • Major Soft Drink firms, Airlines and Milk firms can be cited as an example of Oligopoly.

Features   [Forms of Market Structure-OLIGOPOLY]

A Few Firms

  • Oligopoly as an industry is composed of few firms, or a few large firms controlling bulk of its output. Forms of Market Structure-OLIGOPOLY

Firms are mutually Dependent

  • Each firm in oligopoly market carefully considers how its actions will affect its rivals and how its rivals are likely to react. This makes the firms mutually dependent on each other for taking price and output decisions

Barriers to the entry of new Firms

  • The main cause of limited number of firms in oligopoly is the barriers to the entry of new firms. One barrier is that a new firm may require huge capital to enter the industry. Patent rights are another barrier.  Forms of Market Structure-OLIGOPOLY

Non Price Competition

  • When there are only a few firms, they are normally afraid of competing with each other by lowering the prices; it may start a Price War and the firm which starts the price war may ultimately loose. To avoid price war, the firm uses other ways of competition like: Customer Care, Advertising, Free Gifts etc. Such a competition is called non-price competition.  Forms of Market Structure-OLIGOPOLY


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