What is an Oligopolistic Environment?
An oligopolistic environment is a market structure characterized by the presence of few firms, which produce either identical or differentiated products. These firms are distinct from perfect competition because they have some degree of control over the market prices and can act as a single unit. Oligopolies are often found in industries where there are high barriers to entry, such as in the oil, automobile, and aviation industries.
Characteristics of an Oligopolistic Environment
Oligopolistic markets have the following characteristics:
- Few firms: There are only a few firms in the market, which makes the market less competitive. This means that firms have the ability to influence prices and output.
- Strategic Interaction: Firms in an oligopolistic market interact strategically, meaning that they take into account the decisions of their rivals when making their own decisions.
- Price Rigidity: Prices in an oligopolistic market are generally more rigid than in a more competitive market. This means that prices do not adjust quickly to changes in the market.
- Non-Price Competition: Firms in an oligopolistic market often engage in non-price competition, such as advertising and product differentiation, in order to gain market share.
Examples of Oligopolistic Markets
Some examples of oligopolistic markets include the oil industry, automobile industry, and the aviation industry. In the oil industry, there are few oil companies that dominate the market and have the ability to set prices. In the automobile industry, there are a few large companies that produce cars and have the power to influence prices. In the aviation industry, there are a few major airlines that control the market and set prices.
Conclusion
An oligopolistic market is a market structure characterized by the presence of few firms that have some degree of control over the market prices and output. Oligopolistic markets are often found in industries where there are high barriers to entry, such as the oil, automobile, and aviation industries.
References
[1] Investopedia. (2020). Oligopoly. Retrieved from: [2] Khan Academy. (2020). Oligopoly. Retrieved from: