Forms of Market — Economics STD 12 Commerce / Arts — Question

The term Oligopoly is derived from the Greek words ‘Oligo’ which means few and ‘Poly’ which means sellers. Hence, following are its features –

1. Many buyers and few sellers : There are many buyers and a few sellers or firms (may be five or six) who dominate the market and have major control over the price of a product.

2. Interdependence : Since the number of firms are less, any change in price, output, product etc. by one firm will affect the rival firms and will force them to change their price, output, etc. E.g. In case of Coke and Pepsi in soft drink market.

3. Selling cost or advertising : Each firm in order to sell more of its product takes aggressive steps to advertise or through free samples. This helps them to capture larger sales.

4. Barrier to entry : The firm can easily exit from the industry whenever it wants, but to enter a new industry it has certain entry barriers like government license, patent right, etc.

5. Uncertainty : There is a great uncertainty in this market if the rival firms join hands and may try to fight each other.

6. Lack of Uniformity : The firms may produce either homogeneous or differentiated products. Eg. In automobile industry, Maruti, Indica are examples of differentiated product but cooking gas of Bharat Petroleum and Hindustan Petroleum are examples of homogeneous product or pure oligopoly.