How does the oligopoly model differ from other structural models of firms?
An oligopoly is a market structure whereby a few large firms dominate the entire industry. The cereal market is a good example. Kelloggs, Post, General Mills, Quaker are among the few sellers that constitute the entire market. Icons, advertising, free toys inside the boxes are among tactics used to persuade consumers to purchase products.The oligopoly differs considerably from perfect competition because in this type of market structure competing products are virtually the same. The old saying 'an egg is an egg' defines this type of market structure. There is little the egg market can do to influence the consumer to buy one brand of eggs over another. Monopolistic competition is another type of market system where by there are many sellers and buyers of similar products. In this case a tactic known as product differentiation is used to influence consumers by suggesting one product is better than another. This is primarily accomplished through advertising. A leading example is aspirin, generally speaking the chemical formula for aspirin (not advil or tylenol) is the same. However, consumers believe that 'Bayer' aspirin is better than the generic brand due to product differentiation.