Oligopoly

What is the oligopoly?

The oligopoly is a market led by a minority of producers, that is, it is generated when there is few offerers (sellers) for many demanders (buyers).

In this type of market, the number of people who participate as sellers is small, so much so that they can feel the results obtained directly or indirectly from the merchandise they produce.

The word oligopoly comes from the Greek olígos, which means "few", and poléin, which means "to sell." This refers to the few sellers who dominate a given market.

Thus, oligopoly is a type of imperfect competition.

Oligopoly characteristics

We can differentiate the oligopoly of other market situations through these characteristics:

• The sales are made by a small number of companies that influence the market price.
• Generally, one of the companies involved is the leader in terms of prices, which generates that the other companies must follow it without objecting anything.
• When it comes to pricing, these they can be established by the companies independently or they can meet to make a decision on the whole.
• It includes a situation of imperfect market competition.

Types of oligopoly

The oligopoly can be differentiated or concentrated.

The oligopoly can be differentiated or concentrated.

Differentiated oligopoly

In this classification are the companies that compete with the same product, but offering different qualities or values.

For example, airline or vehicle services.

Concentrated oligopoly

The concentrated oligopoly occurs when there are few products with identical raw material or production.

For example, the market for razor blades, since it has few suppliers with practically the same products.

Difference between oligopoly and monopoly

The Monopoly is generated when a specific product or service is in charge of only one person or company. On the other hand, the oligopoly is generated when a good or service is produced by a minority group of companies who work with the same products and have dominance over the market.

For example, a monopoly It could consist of a single electricity service company that has total control of the supply in a given population, while the oligopoly It could be the digital television market, which is controlled by 2 or 3 companies in a given territory.

Examples of oligopoly

Here are some examples of oligopoly:

• Credit card companies, such as Visa, MasterCard or American Express. They dominate a market in which the suppliers are very few and the demanders are many.
• Mobile phone operating systems, such as Android, iOS or Windows Phone. They dominate a market with millions of applicants.
• Food companies, such as Nestlé, Unilever or Kellogg Company. Only a few companies dominate the food production market globally.