Oligopoly

Not to be confused with Oligarchy, a form of government where few people control a country.

Competition law
Basic concepts
Anti-competitive practices
Enforcement authorities and organizations
Restrictive market structures
Quantity one two few
Sellers Monopoly Duopoly Oligopoly
Buyers Monopsony Duopsony Oligopsony

An oligopoly (from Ancient Greek ὀλίγος (olígos) 'few' and πωλέω (pōléō) 'to sell') is a market in which pricing control lies in the hands of a few sellers.[1][2]

As a result of their significant market power, firms in oligopolistic markets can influence prices through manipulating the supply function. Firms in an oligopoly are also mutually interdependent, as any action by one firm is expected to affect other firms in the market and evoke a reaction or consequential action.[3] As a result, firms in oligopolistic markets often resort to collusion as means of maximising profits.

Nonetheless, in the presence of fierce competition among market participants, oligopolies may develop without collusion. This is a situation similar to perfect competition,[4] where oligopolists have their own market structure.[5][clarification needed] In this situation, each company in the oligopoly has a large share in the industry and plays a pivotal, unique role.[6]

Many jurisdictions deem collusion to be illegal as it violates competition laws and is regarded as anti-competition behaviour. The EU competition law in Europe prohibits anti-competitive practices such as price-fixing and competitors manipulating market supply and trade. In the US, the United States Department of Justice Antitrust Division and the Federal Trade Commission are tasked with stopping collusion. In Australia, the Federal Competition and Consumer Act 2010 has details the prohibition and regulation of anti-competitive agreements and practices. Although aggressive, these laws typically only apply when firms engage in formal collusion, such as cartels. Corporations may often thus evade legal consequences through tacit collusion, as collusion can only be proven through direct communication between companies.

Within post-socialist economies, oligopolies may be particularly pronounced. For example in Armenia, where business elites enjoy oligopoly, 19% of the whole economy is monopolized, making it the most monopolized country in the region.[7]

Many industries have been cited as oligopolistic, including civil aviation, electricity providers, the telecommunications sector, rail freight markets, food processing, funeral services, sugar refining, beer making, pulp and paper making, and automobile manufacturing.

  1. ^ "Dictionary.com | Meanings & Definitions of English Words:oligopoly". Dictionary.com. Retrieved 26 September 2024.
  2. ^ "What Makes a Market an Oligopoly?". www.stlouisfed.org. Retrieved 26 September 2024.
  3. ^ "Archived copy". homework.study.com. Archived from the original on 24 April 2023. Retrieved 24 April 2023.{{cite web}}: CS1 maint: archived copy as title (link)
  4. ^ Opentextbc.ca. n.d. 10.2 Oligopoly. [online] Available at: https://opentextbc.ca/principlesofeconomics/chapter/10-2-oligopoly/ [Accessed 24 April 2021].
  5. ^ "Competition Counts". 11 June 2013. Archived from the original on 4 December 2013. Retrieved 23 March 2018.
  6. ^ Dubey, Pradeep; Sondermann, Dieter (2009). "Perfect competition in an oligopoly (Including bilateral monopoly)". Games and Economic Behavior. 65: 124–141. doi:10.1016/j.geb.2008.10.009.
  7. ^ Mikaelian, Hrant (2015). "Informal Economy of Armenia Reconsiered". Caucasus Analytical Digest (75): 2–6. Archived from the original on 7 March 2023. Retrieved 9 December 2022 – via Academia.edu.