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The word is derived from the Greek and describes a situation where there are only a few sellers of a commodity or service on a given market, eg. in the European Union the production of detergent is almost entirely divided between Unilever and Procter & Gamble. Rivalry on the market usually results in lower profits than could be achieved through firms cooperating with one another. Such cooperation to limit competition is known as collusion. A more formal type of collusion would be a price fixing ring, known as a cartel - an illegal arrangement in most countries.

The main theories are:

• Stackelberg's duopoly

• Cournot's duopoly

• Sweezy's oligopoly

• Betrand's olipogoly

• Contestable markets by Baumol