OLIGOPOLY Meaning and
Definition
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Oligopoly refers to a market structure characterized by a situation where only a small number of large firms dominate the industry and collectively control a significant portion of the market share. In an oligopoly, the market is typically shared by a few dominant players who possess considerable market power, often resulting in limited competition. This concentration of power enables the oligopolistic firms to influence or manipulate market conditions and price levels.
One defining trait of an oligopoly is the interdependence among the few firms involved. Due to the small number of competitors, the actions or decisions of one firm directly impact the others. This interdependence can lead to strategic behavior, as firms closely monitor and respond to the actions of their rivals. Common strategies in oligopolistic markets include price fixing, colluding, or engaging in tacit cooperation to maintain market stability and maximize profits.
Moreover, barriers to entry can be significant in an oligopoly, raising the difficulty for new firms to enter the market and compete with the established players. These entry barriers can be created by factors such as high start-up costs, established brand loyalty, or legal and regulatory hurdles.
Oligopolies can be found in various industries, such as banking, telecommunications, automotive, and technology. The behavior and performance of firms within an oligopoly can have significant implications for market dynamics, consumer welfare, and overall economic efficiency.
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Etymology of OLIGOPOLY
The word "oligopoly" is derived from two Greek words: "oligoi", meaning few, and "polein", meaning to sell. The term was first used in the early 20th century by economists to describe a market structure where a few companies dominate the industry and have significant control over the prices and production levels. The combination of "oligoi" and "polein" reflects the idea that in an oligopoly, a small number of firms have the power to sell and determine the terms of trade within the market.
Similar spelling words for OLIGOPOLY
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