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| In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome |
In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approximating ]. | ||
| A number of theories have attempted to explain the behaviour of oligopolies: | A number of theories have attempted to explain the behaviour of oligopolies: | ||
Revision as of 09:56, 12 June 2002
An oligopoly is a form of imperfect competition in which a market is dominated by a small number sellers. A market with only two sellers is also known as a Duopoly. The word is derived from the Greek for "few sellers".
In industrialised countries oligopolies are found in many sectors of the economy, such as cars, consumer goods, and steel production.
Oligopolistic competition can give rise to a wide range of different outcomes. In some situations, the firms may collude to raise prices and restrict production in the same way as a monopoly. Where there is a formal agreement for such collusion, this is know as a cartel. There are legal restrictions on such collusion in most countries. There does not have to be a formal agreement for collusion to take place - for example, in some industries, there may be an acknowledged market leader which informally sets prices to which other producers respond.
In other situations, competition between sellers in an oligopoly can be fierce, with relatively low prices and high production. This could lead to an efficient outcome approximating perfect competition.
A number of theories have attempted to explain the behaviour of oligopolies:
- Stackelberg's duopoly
- Cournot's duopoly
- Sweezy's oligopoly
- Betrand's olipogoly
- Contestable markets by Baumol
- Various theories based on game theory
Other market forms