Oligopoly

Oligopoly means that there are few sellers. In an oligopolistic market, each seller supplies a large portion of all the products sold in the marketplace. Because the cost of starting a business in an oligopolistic industry is usually high, the number of firms entering it is low.

Companies in oligopolistic industries include such large-scale enterprises as automobile companies and airlines. As large firms supplying a sizable portion of a market, these companies have some control over the prices they charge. But there’s a catch: because their products are fairly similar, when one company lowers prices, others are often forced to follow suit to remain competitive. You see this practice all the time in the airline industry: when American Airlines announces a fare decrease, Continental, United Airlines, and others follow suit. Likewise, when one automaker offers a special deal, its competitors usually come up with similar promotions.

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1.5 Monopolistic Competition, Oligopoly, and Monopoly from Exploring Business by the University of Minnesota Libraries Publishing is an adaptation of a work whose original author and publisher request anonymity and is available under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International license. © 2016, University of Minnesota. UMGC has modified this work and it is available under the original license.