Characteristics of an Oligopolistic Market Structure
An oligopolistic market structure is a structure, in which only a few large companies are dominant. These firms may be the only ones in the market or at times there may also be other small businesses. The first and foremost common characteristic of this market structure lies in the number of firms in the market. There are not so many companies, but they have a large capacity. Being few in the market makes it possible for one company’s decisions to affect the other firms. The second characteristic of this market is that the companies exercise mutual interdependence. As just a few companies are present when a firm makes a choice it is bound to affect the rest of the companies in the marketplace. For this reason, companies are dependent on each other. Before making its decisions, a company must inquire about the reaction of its neighbors. On their part, the neighboring firms have to keep strategizing on how to beat their competitors in the market. Strategic behavior is the third characteristic of the oligopolistic market structure. Firms have to keep on strategizing on how to outshine the competition as the companies are interdependent. The strategic behaviors that businesses exercise may include decisions on increasing the prices for their products or embarking on creative marketing like product differentiation.
The fourth distinguishing factor of this market structure is its various barriers to entry created by the few large companies to prevent small firms from entering the market. Oligopolies always consist of a few companies dominating the entire market. These companies enact bar