Essay: What is Oligopoly

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Essay: What is Oligopoly

Sample Essay

Oligopoly is a type of business in which there are a few participants in the market such that the few involved are the ones who dominate the market. This means that the few participants are the ones who set the prices to be followed in the market and this leads to high market concentration (Case & Fair, 2007). This further leads to barriers to trade since the few suppliers who are leading the market dominate it is such a way that fresh suppliers are not able to enter the industry. It should also be noted that the each of the supplier’s actions are monitored so that there is no type of war that can arise in the market. For instance, if it happens that one of the suppliers lowers his or her price, there will be price war in the market and this can only be resolved through price leveling. Duopoly is also a form of oligopoly and it is the most poisonous since it involves only two suppliers involved.

Oligopolies are found in several sectors of the economy including UK petrol dealers and soft drinks sellers. It can be argued that oligopolies are bad in the society but is should be noted that they are not always bad. Since there should be agreements in all business ventures, it is clearly shown in figure two that when one of the firms fails to stand by the set agreement and cheats, it makes more profits then the firm that stands by the agreement. This follows that all the firms will be tempted to break the set agreements and increase their profits.

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