The oligopoly market is a type of market where there are few sellers, but many buyers. The oligopoly market is usually a market consisting of three, five or eight giant firms. In addition to giant firms, there are sometimes small firms. There are few large companies in today’s market. There are three or five large firms dominating the market in copper, aluminum, iron and steel, automobiles, tractors, trucks, automotive, petrochemicals and heavy industries.
The characteristics of oligopoly markets are as follows:
The number of vendors in oligopoly markets is so low as to give the firm the power to dictate or direct price, as in the monopoly market; nor as much as each one will not affect the price. The withdrawal of the company from the market on the oligopoly market is an important factor that will affect the total supply in a significant way and may cause prices to rise. The entry of a new company into the market will also reduce prices and other firms can also impact.
The oligopoly market is not easy for new companies to enter because of some reasons. Some of them are like production capital, absolute cost advantages or big capital that exceeds the financial possibilities of new firms who want to enter the market.
In the oligopoly market, the prices of all companies are similar. Homogeneous oligopoly is called homogenous oligopoly, if the firms’ goods are different from each other, this is called “differentiated oligopoly.” Homogeneous oligopoly can be exemplified by cement and steel, while differentiated oligopoles are examples such as automobile, machine and building materials. as well as factors such as advertising, sales policy, trade name, and so on, make a company’s product different from other firms.
Oligopoly companies have to follow each other’s behavior closely. If one of the companies tries to increase the quantity of production, the quality of the goods, the quantity of sale, and the price policy to be applied, the other companies will also affect these companies because oligopoly market has a small number of firms and each company is important. , each firm should closely monitor what other firms are doing and take into account the response of other firms.
There is usually no price competition in oligopoly markets. Every firm wants to maintain the same price and maintain it. But despite the lack of price competition, firms choose competition through advertising in a common sense. As they can be seen in TV commercials, they enter the competition by changing the shape, appearance, packaging of the same goods. It does not mention other competitors’ names and product features, but claims that their products are superior to others