Oligopoly is a market structure in which a few large sellers supply the entire market, each holding a share big enough that its actions visibly affect the others. It sits between monopoly (one seller) and monopolistic competition (many sellers).

How it works

Products may be homogeneous (steel, cement, aluminium) or differentiated (cars, smartphones, telecom plans). Either way, the small number of firms means each one's decision is strategic, not isolated.

Because a price cut is quickly matched by rivals but a price rise is not, prices tend to be sticky. Firms therefore avoid price wars and compete instead through advertising, branding, and product features — this is called non-price competition.

Barriers to entry — economies of scale, patents, high capital needs, and control of key inputs — keep new firms out and preserve the small-numbers structure.

Key features

• Interdependence — the hallmark; rivals' reactions drive every decision.
• Few sellers, many buyers.
• Barriers to entry protect incumbents.
• Price rigidity — often explained by the kinked demand curve: rivals match a cut but ignore a rise.
• Non-price competition — heavy advertising and differentiation.

Quick example

Two airlines dominate a route.

1. Airline A cuts its fare to win passengers. …