Oligopoly together a sector structure is distinctly different from other market forms.

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Its main features are questioned as follows:

1. Interdependence:

The foremost properties of oligopoly is interdependence that the assorted firms in the decision making.

This truth is known by all the this firm in one oligopolistic industry. If a small variety of sizeable that company constitute an industry and one of these firms start advertising campaign on a large scale or draft a new model the the product which instantly captures the market, it will certainly surely provoke countermoves ~ above the component of rival firms in the industry.

Thus various firms are closely inter dependency on every other.

2. Advertising:

Under oligopoly a significant policy readjust on the part of a certain is likely to have actually immediate results on other firms in the industry. Therefore, the rival firms remain all the moment vigilant about the move of the certain which bring away initiative and makes policy changes. Thus, advertising is a powerful instrument in the hands of one oligopolist. A firm under oligopoly deserve to start an wild advertising campaign with the on purpose of capturing a huge part the the market. Other firms in the industry will obviously stand up to its protective advertising.

Under perfect competition declaring is unnecessary when a monopolist may discover some declaring to be financially rewarding when his product is brand-new or as soon as there exist a large number that potential consumers who have never make the efforts his product earlier. But according come Prof. Baumol, “under oligopoly, heralding can end up being a life-and-death matter where a certain which fails to store up through the advertising budget plan of its competitors may discover its customers drifting off to rival products.”

3. Team Behaviour:

In oligopoly, the most relevant element is the behaviour of the group. There deserve to be 2 firms in the group, or three or five or even fifteen, but not a couple of hundred. Everything the number, the is quite small so that each firm knows that its actions will have some impact on various other firms in the group. In contrast, under perfect competition there are a large number that firms every attempting to maximise its profits.

Similar is the situation under monopolistic competition. Under monopoly, over there is just one benefit maximising firm. Whether one considers monopoly or a competitive market, the behaviour of a for sure is typically predictable.

In oligopoly, however, this is not possible due to various reasons:

(i) The that company constituting the team may not have actually a typical goal

(ii) The group may or may not have actually a formal or informal organization with welcomed rules of conduct

(iii) The team may be dominated by a leader however other that company in the group may not follow that in a uniform manner.

4. Competition:

This leads to one more feature that the oligopolistic market, the presence of competition. Since under oligopoly, there space a couple of sellers, a relocate by one seller immediately affects the rivals. So every seller is always on the alert and keeps a close watch over the moves of that rivals in bespeak to have a counter-move. This is true competition, “True competition is composed of the life of continuous struggle, rival against rival, who one deserve to only discover under oligopoly.”

5. Barriers to entry of Firms:

As there is keen vain in an oligopolistic industry, there space no obstacles to entry right into or exit from it. However, in the long-run, there room some species of barriers to entry which have tendency to restrain brand-new firms native entering the industry.

These might be:

(a) business economics of scale delighted in by a few large firms;

(b) manage over important and committed inputs;

(c) High funding requirements because of plant costs, advertising costs, etc.

(d) exclusive patents; and also licenses; and

(e) The presence of unused capacity which makes the sector unattractive.

When entrance is limited or blocked by such natural and artificial barriers the oligopolistic industry have the right to earn long-run supernormal profits.

6. Absence of Uniformity:

Another feature of oligopoly sector is the absence of power in the dimension of firms. That company differ significantly in size. Some may be small, others very large. Such a instance is asymmetrical. This is an extremely common in the American economy. A symmetrical situation with this firm of a uniform size is rare.

7. Visibility of Price Rigidity:

In oligopoly situation, each firm needs to stick come its price. If any type of firm make the efforts to alleviate its price, the competitor firms will certainly retaliate by a higher reduction in their prices. This will lead to a instance of price war which services none. On the various other hand, if any kind of firm rises its price with a check out to boost its profits; the various other rival firms will certainly not follow the same. Hence, no for sure would choose to minimize the price or to boost the price. The price rigidity will certainly take place.

8. No distinct Pattern the Pricing Behaviour:

The rivalry occurring from interdependence amongst the oligopolists leads to 2 conflicting motives. Each desires to stay independent and also to gain the maxmium possible profit. Towards this end, castle act and also react top top the price-output movements of one one more which room a consistent element of uncertainty.

On the other hand, again encouraged by profit maximisation each seller desire to cooperate v his rivals to minimize or get rid of the element of uncertainty. Every rivals enter into tacit or formal commitment with regard to price-output changes.

It leads to a sort of monopoly within oligopoly. They may even recognize one seller as a leader at who initiative every the various other sellers advanced or lower the price. In this case, the separation, personal, instance seller’s need curve is a part of the industry demand curve, having the elasticity of the latter. Given these conflicting attitudes, that is not possible to predict any type of unique sample of pricing action in oligopoly markets.

9. Indeterminateness of need Curve:

In industry structures various other than oligopolistic, need curve faced by a for sure is determinate. The interdependence of the oligopolists, however, renders it difficult to draw a demand curve for such sellers other than for the instances where the type of interdependence is fine defined. In real service operations, the need curve continues to be indeterminate. Under oligopoly a firm can expect at least three different reactions the the other sellers as soon as it lowers that prices.

This happened as result of the reason:

(i) that is possible that other preserve the price they had actually before. In this case, an oligopolist can hope the its need would rise substantially together the prices space lowered,

(ii) when an oligopolist reduce his price, the various other sellers likewise lower your prices through an indistinguishable amount. In this instance although need of the oligopolist do the an initial move will boost as he lowers his price, the increase itself would certainly be much smaller than in the first case.

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(iii) when a for sure reduces the price, the other sellers reduce their prices much more. Under the scenarios the demand for the product of the oligopolistic for sure which makes the first move might decrease. Hence uncertainty under oligopoly is inevitable, and as a result, the demand curve challenged by every firm belonging to the group is have to indeterminate.

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