Oligopoly

From Conservapedia

Jump to: navigation, search

An oligopoly is a market with only a few sellers, who enjoy barriers to entry against new competitors. An oligopoly lacks full competition and consumers may suffer as a result.

Described another way, an oligopoly is an industry or market dominated by a only few firms selling a similar (undifferentiated) product. This is called a "perfect oligopoly." The few firms can behave in a harmful manner similar to how a monopoly behaves in overcharging customers or otherwise suppressing beneficial competition, since a low number of dominant actors in the market makes it relatively easy for them to collude and form a cartel.

Even if there is no collusion, the lack of competion may cause price to rise above marginal cost, where it would be if there were more firms, as competion forces prices down as firms undercut each other.

An imperfect oligopoly consists of a few firms in an industry or market, but their product is differentiated, as in the car industry.

The retail gasoline market is a good example of an oligopoly because a small number of firms control a large majority of the market.

Personal tools