What is the oligopoly?

The basis for the development of any trade is competition. But when the market of some goods or services is represented by a small number of participants, competition is hampered or becomes completely impossible. Let's try to understand the peculiarities of such a market and find out what an oligopoly is.

Oligopoly is a characteristic

The word "oligopoly" has a Greek origin: "oligos" - a few, few and "poleo" - I sell. Therefore, literally, one can translate as "a few sellers".

Oligopoly is a kind of marketcertain products, in which the number of participants is extremely limited. As a rule, these are several companies that sell a uniform (identical) product, each under its own brand. However, the goods can also be heterogeneous (differentiated).

Sometimes there can be only two such manufacturers, for example, the leaders of the world aircraft construction "Airbus" and "Boeing". A similar oligopoly is called a duopoly (duo - two).

The share of such firms in the turnover is so great,that the presence of other, smaller competitors, does not have a significant impact on the market (the TU is unlikely to be able to withstand Boeing, the Volga-Mercedes).

Pricing

For the oligopoly, it is characteristic to focus onother market participants in setting prices. If the firm wants to raise prices, but will do it unilaterally, it will certainly lose customers. After all, they can buy a similar product or service from another company.

It happens that the firm, wishing to increase sales,reduces prices (the desire for price leadership). Then the rest of the participants, in order not to suffer losses, have to do the same. Similar price wars are often not borne by weaker companies and, having gone broke, leave the market.

Quite often oligopoly conclude agreements,concerning price policy and the delimitation of spheres of influence. Such a "secret collusion" is prohibited by the state, since it leads to the formation of monopolies.

A common phenomenon is the merger of companies (confluence) in order to withstand larger competitors.

Thus, the main features of the oligopoly are a limited number of participants and a uniform pricing policy.