Oligopoly Market

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Oligopoly Market

Oligopoly is a market which there is a few sellers dealing with a homogeneous or differentiated product. Being small in number, these producers, though independent, are in fact dependent upon each other in a manner that the price policy and sales of each are bound to have their effect on the price and sales of others. The goods being homogeneous, or close substitutes, have a high cross elasticity of demand. So, if one of the sellers reduces his price, he can draw a lot of customers from the others and therefore, the other producers are also likely to make a similar move and reduce their prices, which in turn, would affect price and sales of this firm. Thus, each firm under oligopoly has to their decision on this firm.

Duopoly is also a form of oligopoly market in which there are only two firms. Here, each firm closely watches the behavior of others and takes its decisions only after duly considering the likely response of the other firms to its decision.


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