Definition
An oligopoly is a market form wherein a market or industry is dominated by a small number of large sellers. Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Oligopoly has its own market structure.
Oligopoly
What is an ‘Oligopoly’
Oligopoly is a market structure in which a small number of firms has the large majority of market share. An oligopoly is similar to a monopoly, except that rather than one firm, two or more firms dominate the market. There is no precise upper limit to the number of firms in an oligopoly, but the number must be low enough that the actions of one firm significantly impact and influence the others.
Explaining ‘Oligopoly’
An example of an oligopoly is the wireless service industry in Canada, in which three companies – Rogers Communications Inc (RCI), BCE Inc (BCE) subsidiary Bell and Telus Corp (TU) – control approximately 90% of the market. Canadians are conscious of this oligopolistic market structure and often lump the three together as “Robelus,” as though they were indistinguishable. In fact, they are often indistinguishable in price: in early 2014 all three companies raised the price for smartphone plans to $80 in most markets, more or less in tandem.
Further Reading
- Oligopoly and financial structure: The limited liability effect – www.jstor.org [PDF]
- Oligopoly and financial structure: Comment – www.jstor.org [PDF]
- Bankruptcy costs and the theory of oligopoly – www.jstor.org [PDF]
- Optimum welfare and maximum revenue tariffs under oligopoly – ideas.repec.org [PDF]
- Financial structure and tacit collusion with repeated oligopoly competition – www.sciencedirect.com [PDF]
- Oligopoly, financial structure, and resolution of uncertainty – onlinelibrary.wiley.com [PDF]
- Theories of oligopoly behavior – www.sciencedirect.com [PDF]
- Irreversible investment, financing, and bankruptcy decisions in an oligopoly – www.jstor.org [PDF]
- CAPITAL STRUCTURE IN A STOCHASTIC OLIGOPOLY. – elibrary.ru [PDF]
