What are the basic characteristics of oligopoly market structure?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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The basic idea of oligopoly is that it is a market structure in which there are only a very few large firms that are participating in the market.  The main characteristics of this market structure are:

  • A small number of sellers, enough that any one of them can influence the overall market. 
  • Homogeneous or differentiated product. 
  • Difficult to enter the market.  This means that new competitors cannot easily enter to compete with the firms already in the market.

Firms in this market structure must pay a good deal of attention to one another as the actions of each firm can have a major impact on competitors.  This is the market structure of big businesses such as auto makers.

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