Oligopoly

The products that the oligopoly supplies to the market are identical to the products of competitors (for example, the Internet or mobile communications), or have differentiation (for example, aircraft, ships). At the same time, price competition is very rare in oligopolistic markets. Firms see profit opportunities in the development of non-price competition. As a rule, it is very difficult for new firms to enter the oligopolistic market. Barriers are either legal restrictions or the need for large initial capital. Therefore, big business is an example of an oligopoly.

Of particular importance to the functioning of oligopolies is their awareness of the market. Given the ability of competitors to expand production, each firm is afraid of rash actions that reduce its market share. Therefore, awareness is one of the prerequisites for existence. The behavior of each firm in the market has a clearly justified logic of actions and therefore is called strategic. Over time, strategies can be adjusted, but such changes are of a medium or long-term nature.

• Cartel. The best strategy for an oligopoly is to collude with competitors over production prices and output volumes. Collusion makes it possible to increase the power of each of the firms and to use opportunities for obtaining economic profits in the amount that a monopoly would receive if the market were monopoly.
• Price leaders. As a rule, among the set of firms, one stands out, which becomes the leader in the market. This is due, for example, to the duration of existence (authority), the presence of more professional staff, the presence of scientific departments and the latest technologies, their higher market share. The leader is the first to make changes in price or output. At the same time, the rest of the firms repeat the actions of the leader. As a result, there is a coherence of common actions. The leader should be the most informed about the dynamics of demand for products in the industry, as well as about the capabilities of competitors.
• General addiction. Since there are a small number of firms in the market, sellers need to develop development strategies for their firm so that they are not forced out of the market by competitors. Since there are few firms in the market, companies closely monitor the actions of competitors, including their pricing policy, with whom they cooperate, etc.