Oligopoly: How It Works, Why It Exists, and Its Characteristics, Advantages, and Disadvantages

Introduction
The four primary market structures include perfect competition, monopolistic competition, monopoly, and oligopoly. All of them describe different variations of competitive environments with varying levels of control in a market; however, among them, oligopoly is denoted as the most unique and complex type of market structure. It is defined as a small number of firms dominate the market as opposed to perfect competition where many firms are quite free to compete and monopoly where only one firm holds the whole market. These companies have almost total power over the market and have very strong control over setting prices, production, demands, and consumer choice preference. What is oligopoly, its working, and reasons behind its existence, as well as its basic features, will be examined. The benefits and drawbacks of this market structure, along with industries functioning as oligopolies, will also be addressed.
What Is Oligopoly?
In this situation, an industry can undergo a small number of firms competing in consonance of the most concentrated part of market sales volume. Basically, firms in an oligopoly are interdependent. What one firm does (its price, production, and marketing) will affect the others directly. Unlike perfect competition, where firms are price takers, firms in oligopoly possess enough market power to influence prices and other conditions in the market. However, since there are few players only, competition is still present. This effectively calls for firms to consider the possible responses of their competitors before their action.
Key Characteristics of Oligopoly:
Few Firms: few firms who have a large share in the market. The number may vary, but typically ranges between two and ten.
Interdependence Any action taken by a firm under an oligopoly will affect, to some extent, all other firms as regards decision-making relating to price and output, and competition will ultimately take some kind of strategic form.
Barriers to Entry: The e