Oligopoly
Definition
An oligopoly refers to a market structure where a few large firms dominate the industry and have significant control over prices and competition.
Analogy
Imagine you and your friends are the only ones selling lemonade in your neighborhood. You all have different recipes, but since there are only a few of you, you can easily influence the price and demand for lemonade.
Related terms
Collusion: When firms in an oligopoly secretly cooperate with each other to reduce competition and increase profits.
Price leadership: A situation where one dominant firm sets the price, and other firms follow suit.
Barriers to entry: Obstacles that make it difficult for new firms to enter an industry dominated by oligopolies.
"Oligopoly" appears in:
Study guides (3)
Additional resources (1)
Practice Questions (2)
- In an oligopoly, a few firms dominate the market. What is a key characteristic of an oligopoly market structure?
- In an oligopoly, firms may engage in non-price competition to gain a competitive advantage. Which strategy involves spending on advertising and promotional activities to differentiate a product?
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