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An oligopoly (from Ancient Greek ὀλίγος (olígos) 'few' and πωλέω (pōléō) 'to sell') is a market in which pricing control lies in the hands of a few sellers. [ 1 ] [ 2 ] As a result of their significant market power, firms in oligopolistic markets can influence prices through manipulating the supply function .
Oligopoly: The number of enterprises is small, entry and exit from the market are restricted, product attributes are different, and the demand curve is downward sloping and relatively inelastic. Oligopolies are usually found in industries in which initial capital requirements are high and existing companies have strong foothold in market share.
However, this is example-specific. There may be cases where a Stackelberg leader has huge gains beyond Cournot profit that approach monopoly profits (for example, if the leader also had a large cost structure advantage, perhaps due to a better production function). There may also be cases where the follower actually enjoys higher profits than ...
An oligopoly where each firm acts independently tends toward equilibrium at the ideal, but such covert cooperation as price leadership tends toward higher profitability for all, though it is an unstable arrangement. There exist two types of price leadership. [14] In dominant firm price leadership, the price leader is the biggest firm.
It contrasts with an oligopoly, where there are many buyers but few sellers. An oligopsony is a form of imperfect competition . The terms monopoly (one seller), monopsony (one buyer), and bilateral monopoly have a similar relationship.
In microeconomics, the Bertrand–Edgeworth model of price-setting oligopoly looks at what happens when there is a homogeneous product (i.e. consumers want to buy from the cheapest seller) where there is a limit to the output of firms which are willing and able to sell at a particular price. This differs from the Bertrand competition model ...
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An oligopoly may engage in collusion, either tacit or overt to exercise market power and manipulate prices to control demand and revenue for a collection of firms. A group of firms that explicitly agree to affect market price or output is called a cartel , with the organization of petroleum-exporting countries ( OPEC ) being one of the most ...