The oligopoly refers to the market structure where the hold is held in the hands of a few firms. This situation leads to a highly concentrated market. Oligopoly does not merely means that only a few firms operate, but it suggests that operating firms can be many but the domination is held by a few ones.
Therefore, it is not wrong to conclude that oligopoly is a state somewhere between capitalists and monopolistic market. Let's have a look at some of the characteristics possessed by the businesses laying in the oligopoly category:
Such firms are not truly monopolistic but are more condensed from the one in the pure competition system. Consider the example of airlines, they experience competition within a concentrated system. Airlines which have the same routes keep an eye on the competitor's flight price.
Such businesses usually offer almost similar kind of services and products. This situation leads to spending lots of money in areas like advertising and packaging of the products in order to stand out among others. Convenience products manufacturers are examples of imperfect oligopoly.
The most common industries which are in oligopoly category include aluminium producers, steel industry, television manufacturers, gas industries and cell phone makers etc. The biggest examples are as follows:
1. 80% of the music industry market share is held by 4 giants including; EMI group, Sony Music Entertainment, Universal Music Group and Warner Music Group.
2. The two giants of the beer industry are MillerCoors and Anheuser.
The advantages of oligopoly cannot be ignored as the prices are lower than one charged in monopolistic market. The prices almost remain constant throughout because if one firm lowers down the price, competitors do the same to maintain their standing.
Nothing is perfect, Likewise some of the issues which are hooked up with oligopoly too. Entrance of the new people in the market is not easy. There are lots of barriers also like patents, economies of scale and government regulations.
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