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Answer to Question #10739 in Economics of Enterprise for debangan chakraborty

Question #10739
oligopoli market
Expert's answer
Oligopoly is the condition of a market where more than two or a few sellers are found in monopolistic position. The word “oligopoly” comes from the
Greek “oligos” meaning "little or small” and “polein” meaning “to sell.” When
“oligos” is used in the plural, it means “few.”.


Characteristics of Oligopoly:
Interdependence: The firms under oligopoly are interdependent in making decision. They are interdependent because the number of competition is few and
any change in price & product etc by an firm will have a direct influence on
the fortune of its rivals, which in turn retaliate by changing their price and
output.
Importance of advertising and selling costs: The firms under oligopolistic market employ aggressive and defensive weapons to gain a greater share in the
market and to maximize sale. In view of this firms have to incur a great deal on
advertisement and other measures of sale promotion.
Group behavior: The firms under oligopoly are interdependent as they are in a group.
Indeterminacy of demand curve: The demand curve as is well known, relates to the various quantities of the product that could be sold it different
levels of prices when the quantity to be sold is itself unknown and uncertain
the demand curve can't be definite and determinate.
Elements of monopoly: Under oligopoly with product differentiation each firm controls a large part of the market by producing differentiated product. In such
a case it acts in its sphere as a monopolist in lining price and output.
Price rigidity: If any firm makes a price-cut it is immediately retaliated by the rival firms by the same practice of price-cut. There occurs a price-war
in the oligopolistic condition. Hence under oligopoly no firm resorts to
price-cut without making price-output decision with other rival firms. The net
result will be price -finite or price-rigidity in the oligopolistic condition.

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