Resembling Monopolistic competition situations, Oligopolistic market is also an outline of imperfect competition. This format of market structure is highly visible in developed economies. The following are the characteristics of an oligopolistic market (Parker & Nellis, 2006, p. 188):
← Small number of suppliers and large number of buyers: One of the most essential characteristics of oligopoly is the existence of few large companies who gain adequate market power and dominate the industry. For instance, an industry may have numerous operating firms, however, it may be considered as an oligopolistic market if its total output is derived from its top five firms.
← Homogeneous or, more commonly, differentiated products:
← Homogenous product oligopoly: Companies producing raw materials such as steel or aluminium, or products which can be utilized as inputs by finished goods companies’ can be referred to as Homogenous product oligopolistic companies;
← Differentiated product oligopoly: Companies producing goods such as automobiles, console systems etc., or products for consumers’ personal consumption can be referred to as differentiated product oligopolistic companies.
← Barriers to enter into the market: Due to small number of suppliers available in the oligopolistic market, it permits them to implement their market authorities and format entry and exit barriers such as exclusive financial requirements, control over resources etc. (Humbolt State University – Monopolistic Competition and Oligopoly, n.d.);
← Mutual Interdependence: There is existence of mutual interdependence among firms in the market i.e. competitive reactions of one company may compel other companies to undertake similar competitive reactions (Parker & Nellis, 2006, p. 188);
← Companies operating in an oligopolistic market can be referred to as Price–takers or Price–leaders as they have adequate market power to increase or decrease prices depending on factors...