for BBS Economics Students

1. Oligopolistic Competition
By
Khemraj Subedi
Associate Professor
M.Phil in Economics
PhD Scholar in Economics

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Origin of Oligopoly
The word Oligopoly is derived from two
Greek words – ‘Oligi’ meaning ‘few’ and
‘Polein’ meaning ‘to seller’.

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Meaning of Oligopoly
Oligopoly is defined as a market structure with
a small number of firms, none of which can
keep the others from having significant
influence.

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Oligopolistic Competition
●An oligopoly is a market structure in which a
few firms dominate. When a market is
shared between a few firms, it is said to be
highly concentrated. Although only a few
firms dominate, it is possible that many
small firms may also operate in the market.

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Oligopolistic Competition
● The primary idea behind an oligopolistic market
(an oligopoly) is that a few companies rule over
many in a particular market or industry, offering
similar goods and services.
● Because of a limited number of players in an
oligopolistic market, competition is limited,
allowing every firm to operate successfully.
● The situation typically breeds regular partnership
between firms and fosters a spirit of cooperation.
●

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Characteristics of Oligopoly
● Few firms
● Barriers to Entry
● Non-Price Competition
● Interdependence
● Nature of the Product(either homogeneous or
differentiated)
● Role of Selling Costs:
● Indeterminate Demand Curve
● Group Behaviour

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Types of Oligopoly
1. Pure or Perfect Oligopoly:
●If the firms produce homogeneous products,
then it is called pure or perfect oligopoly.
Though, it is rare to find pure oligopoly
situation, yet, cement, steel, aluminum and
chemicals producing industries approach
pure oligopoly.

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Types of Oligopoly cont…
2. Imperfect or Differentiated Oligopoly:
If the firms produce differentiated products, then it is called
differentiated or imperfect oligopoly. For example, passenger
cars, cigarettes or soft drinks. The goods produced by
different firms have their own distinguishing characteristics,
yet all of them are close substitutes of each other.

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Types of Oligopoly cont…
3. Collusive Oligopoly:
●If the firms cooperate with each other in
determining price or output or both, it is
called collusive oligopoly or cooperative
oligopoly.

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Types of Oligopoly cont…
4. Non-collusive Oligopoly:
●If firms in an oligopoly market compete with
each other, it is called a non-collusive or
non-cooperative oligopoly.

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Thank you very much