There are many types of market, one of them is an oligopoly market and in this market, there are only a few sellers and a large number of buyers. This market is also called a seller-dominated market because it has only a few sellers who control the whole market, but the market share of the seller can vary. In this market, buyers have options for products but not much.
An Oligopoly market is a part of an imperfect competition market as it does not have perfect competition and it is exactly opposite to an oligopsony market as an oligopoly market is from the seller’s point of view and oligopsony market is from the buyer’s point of view. For example, in an oligopoly market, there are only a few sellers and a large number of buyers, and in an oligopsony market, there are few buyers and a large number of sellers.
Table of Contents
What is an Oligopoly Market?
An Oligopoly market is a market (situation) in which there are only a few sellers and a large number of buyers. Due to the presence of more than one seller in it, substitute goods are available, and the buyer does not have complete information about the products. In this market, all the sellers are dependent on each other whether it is directly or indirectly because if any seller makes any change in his products, then it can have a huge impact on the market.
In this market, new firms cannot enter easily because there is already so much competition that it may be very difficult for a new firm, but it may not be so. The firms that are present in this market or want to enter may have to spend more on promotion, advertising, etc. because without any information the buyer will not know that a new product has come into the market, but goodwill can be useful here.
Features of Oligopoly Market
Following are the features of oligopoly market:
1. Few Sellers:
There are only a few sellers in this market, and they sell the products to all the buyers. Even though there are only a few sellers in this market, they control the entire market, and, in this market, the seller has more options available than the buyer because this is a seller-dominant market.
2. Large Number of Buyers:
There are a large number of buyers in this market and all the buyers buy products from only a few sellers and their preferences towards the seller may differ and this preference may be due to the product quality, price, quantity, services, etc.
3. Selling Cost:
In this market, selling costs are incurred because the seller has to spend on advertising, promotion, etc. to spread the information about his products to the buyer, and selling cost plays a very important role in this market. Without advertising, the seller may fail to sell more of his products because if people do not get the information, they will not know that a new product has come into the market.
4. Interdependence:
In this market, all the sellers are dependent on each other because if one seller changes its product, then other sellers also have to change their products to stay competitive. For example, when Jio came into the market, it provided the cheapest internet, then other competitors also changed their products accordingly to stay competitive.
5. Barriers to Entry of New Firm:
No new firm can easily join the oligopoly market as it already has so much competition that the new firm may have to suffer huge losses and the government also gives more preference to old and big firms.
6. Competition:
Even though there are fewer sellers in this market, there is competition among the sellers because all the sellers sell similar products and all are engaged in selling their products as much as possible, earning profits and creating brand value and for this they try to sell the product at a lower price, make better products and give good service, etc.
Read Also:
- What is Market? Meaning, Features, and More.
- Types of Market
- What is a Perfect Competition Market? Meaning, Features, and More.
- What is a Monopolistic Competition Market? Meaning, Features, and More.
- What is a Monopoly Market? Meaning, Features, and More.
- What is a Monopsony Market? Meaning, Features, and More.
- What is a Duopoly Market? Meaning, Features, and More.
- What is Duopsony Market? Meaning, Features, and More.
- What is Oligopsony Market? Meaning, Features, and More.
- What is Bilateral Monopoly Market? Meaning, Features, and More.
QNA/FAQ
Q1. What is an oligopoly market?
Ans: An Oligopoly market is a market (situation) in which there are only a few sellers and a large number of buyers.
Q2. Is an oligopoly market a seller dominated market?
Ans: Yes, oligopoly market is seller dominated market.
Q3. Are there only a few sellers in an oligopoly market?
Ans: Yes, there are only a few sellers in an oligopoly market.
Q4. Is there a barrier to entry for a seller in an oligopoly market?
Ans: Yes, there is a barrier to entry for the seller in an oligopoly market.
Q5. In an oligopoly market number of buyers is less than sellers, is it correct?
Ans: No, this is not correct because in oligopoly market number of buyers is more than that of sellers.
Q6. Write the features of oligopoly market.
Ans: Following are the features of oligopoly market:
1. In this market, there are only a few sellers.
2. In this market, there are a large number of buyers.
3. In this market, selling costs are found.
4. In this market, competition is found among the sellers.
5. In this market, there is a barrier to entry for a new seller.
6. In this market, the sellers are dependent on each other.
