Oligopoly Theory

Oligopoly theory describes a market structure where a few large firms dominate industry sales, influencing prices and competition. These companies are interdependent; each firm must consider the actions of others when making decisions. Their behavior can lead to stable prices, collusion, or intense rivalry. Examples include the automobile or airline industries. Unlike perfect competition with many sellers, oligopolies have significant market power concentrated among few firms, resulting in less competition and possibly higher prices for consumers. This structure impacts how products are priced, innovated, and advertised within the market.