Oligopoly is one of the forms of imperfect market in which there are a few firms selling either differentiated of homogeneous products. Here, a few big firms will be controlling the market by producing significant portion of market demand. The example for oligopoly market are the industries which are producing mobiles, cars, cigarettes, tyres etc.
The features of Oligopoly market are as follows:
(a) Existence of few firms: There will be small number of sellers in oligopoly market. These few sellers control the entire market supply. They may be dealing with differentiated or homogeneous products.
(b) Interdependence: There will be interdependency among the firms in oligopoly market. The oligopolists depend on other firms while taking decisions in respect of price and quantities to be supplied. The sellers have to consider each others’ price and output.
(c) Group Behaviour: It is one of the common features of oligopoly market. The firms recognise their interdependency and realize the importance of mutual cooperation. There is always a tendency of collusion among the firms. d) Advertisement: In oligopoly market, advertisement plays a major role in increasing the sales. The oligopolists undertake intensive marketing strategies to increase the sale of goods. Advertisement cost is used as an effective tool to shift the demand in favour of their product.
(e) Existence of homogenous or differentiated products: The firms will be dealing in similar or differentiated products in an oligopoly market. The products may be different like mobiles produced by different firms or similar like steel industry or cotton textile industries.
(f) Price Rigidity: In oligopoly market, prices do not change much though there is change in quantities demanded. Generally, the firms do not change the price of their product even though other firms are changing their prices.
(g) Kinked demand curve: It is the unique feature of oligopoly market. The demand curve in the oligopoly market has a at the level of the prevailing price. The is formed at the prevailing price level. It is because the segment of the demand curve above the prevailing price level is highly elastic and the segment of the demand curve below the prevailing price level is inelastic. A kinked demand curve DD with a **** at point P is given below:
