Posted: April 12th, 2016

Oligopolies mean what?

Oligopolies are market structures where a small number of sellers dominate a particular industry. The smaller number of sellers means that each of these participants are quite aware of each other’s offerings and strategy. Any long term strategy is constituted only after taking into account that of others (Vives, 1999).
The profit maximization condition is that production happens where marginal revenue becomes equal to marginal costs. Such a setup is a price setter and not a price taker, because the sellers hold power and privilege upon the industry.
There are very high entry barriers here, ensuring the small numbers of the sellers and there is obvious motivation on the part of the sellers to keep the club restricted. These can again be from
economies of scale, technological domination, patents and copyrights and strategic partnerships among these sellers to acquire or put out of business any startups.