What is Oligopolistic Competition?
Oligopolistic competition is a type of market structure in economics characterized by a small number of competitors, each of which has significant control over the market. This type of competition is found in industries where few firms dominate the market, such as the cell phone, airline and oil industries.
Characteristics of Oligopolistic Competition
Oligopolistic competition has several characteristics that differ from other market structures, including:
- It has a small number of large firms, which can easily influence the market.
- Firms in an oligopolistic market typically have some degree of market power, meaning they can set prices and control output.
- There is a high degree of interdependence between firms, as each firm is aware of the actions and decisions of the others.
- It is usually difficult for new entrants to enter the market, as the large firms have already established a strong presence.
- Price stability is common in oligopolistic markets, as firms are often reluctant to lower prices out of fear of a price war.
- Firms will usually attempt to differentiate their products to gain a competitive edge.
Examples of Oligopolistic Competition
There are many examples of oligopolistic competition in the modern economy, including:
- The airline industry, which is dominated by a few large firms such as American Airlines and United Airlines.
- The oil industry, which is dominated by a handful of large firms such as ExxonMobil, BP and Shell.
- The cell phone industry, which is dominated by a few large firms such as AT&T, Verizon and T-Mobile.
- The automobile industry, which is dominated by a few large firms such as General Motors, Ford and Toyota.
- The banking industry, which is dominated by a few large firms such as JPMorgan Chase, Bank of America and Wells Fargo.
Conclusion
Oligopolistic competition is a type of market structure in which a small number of large firms have significant control over the market. This type of competition is found in many industries, including the airline, oil, cell phone, automobile and banking industries.