Why is lack of uniformity important in an oligopoly market?

A lack of uniformity in an oligopoly market is important because it helps to distinguish this market structure from others.

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An oligopoly market has a few dominant firms that have a large market share. An oligopoly is said to lack uniformity because the firms are of different sizes. You can find both large and small firms serving the same market. Companies use differentiated products to make their brands stand out. However, since the dominant firms own a large percentage of the market, they determine the prices. A small firm has to set a price that’s almost equal to the one used by large firms.

Luckily, since oligopoly firms enjoy supernormal profits, they rarely use price wars to compete. Instead, they focus on quality and improving service delivery. If price wars were common, small companies would run out of business due to limited finances and resources. Also, smaller firms are at an advantage when it comes to service delivery because they have a small workforce and clientele. That means they can focus all their efforts on the improvement of customer services.

The lack of uniformity is advantageous because it allows small and large firms to co-exist and serve their respective markets without any squabbles.

The competition among the few large firms can lead to better product quality. The supernormal profits enable these companies to invest in innovation and product improvement. This strategy sets the standard for the entire market and allows customers to access better products.

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