An Oligopoly

An Oligopoly

An oligopoly is a market dominated by a few large suppliers. Firms within an oligopoly produce branded products therefore an advertising and marketing is very important feature of competition within such market.

One of the two main characteristics of the Oligopoly is the existence of barriers of entry to and from the industry. These barriers make it difficult for a new entrant to break into a market. Oligopolists are therefore more valuable as they reduce the risk of new competition and are also protected by the barriers and are likely constantly to erect new barriers in order to maintain long-term market share and profits.

The interdependence of decision-making is another characteristic of the oligopoly. It is very significant because it makes it much more difficult for economists to model the behaviour of an oligopolistic firm. The behaviour of one firm will depend upon its perceptions of how other firms will react to changes. The responses of other firms will depend upon their perceptions of the responses of others. It is harder, therefore, to predict how oligopolistic firms are likely to behave.

It might be said Oligopoly (together with Monopoly) are price makers. They tend to exhibit a few important features as they are characteristic above and non-price competition as well. It is a marketing strategy in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design or workmanship in order to accrue greater revenue and market share. The firm can also distinguish its product offering through quality of service, extensive distribution, customer focus, or any other sustainable competitive advantage other than price. It can be contrasted with price competition, which is where a company tries to distinguish its product or service from competing products on the basis of low price. Non price competition typically involves promotional expenditures