What is an oligopoly? Features and examples

When in a market few companies provide or offer a specific service and these influence prices and production conditions, we are talking about a oligopoly.

The word oligopoly comes from the Greek, “oligo”, few, and, “polio”, seller. That is to say, when in a market there are few producers, sellers or suppliers compared to a large mass of buyers or demanders.

What is an oligopoly?

It is a market situation in which those who make up a productive sector do not know the details of the actions of their competitors, avoid situations of commercial imbalance by turning them in their favor, and share more than 70% of the mass of consumers.

This phenomenon usually occurs, among other reasons, due to the behavior of consumers, who have developed loyalty to some brands, superimposing their preferences above the established prices and even the production conditions themselves.

In this context, the oligopoly does not allow other companies or brands to participate in the consumer cake, either for legal or economic reasons established by the companies that participate in it. In an oligopoly, companies have a privileged situation with respect to consumers and potential new competitors, which allows them to be more comfortable when it comes to selling their goods or services.

Although in an oligopoly, companies do not have direct power to intervene in factors such as production or prices, it is a fact that oligopolists establish alliances with each other to control these variables.

Characteristics

  • It is a small group of companies that produce goods or services.
  • This group may be able to decide on the quantity of production and prices in the market.
  • Oligopolistic companies are interdependent from a strategic economic point of view.
  • There are economic or legal obstacles for new competing producers to enter.
  • They maintain the characteristics of the products as a way of “compensating” for consumer loyalty.
  • It is a situation of unfair competition that affects the market.

Examples of oligopoly

There are oligopolies in almost all areas of production, from the food industry, as in the fuel market, software packages, automobile production, etc., such as:

In telecommunications:

In many countries, telecommunications services have a small number of companies that provide them, which means that since there are few companies, consumers do not have much to choose from when wanting to change.

Drinks and food:

Coca-Cola is one of the beverage companies that has generated the most controversy, because although in some countries they have dominant and powerful competitors, in others it has been pointed out as an advantageous and oligopolistic.

This brand has a presence in more than 200 countries, and in several of these it has bought the brands of the competition.

Fuels:

In the United States, there is the best example of an oligopoly, specifically in the fuel area, where four companies dominate the market, such as Chevron, Exxol, Mobil and Texaco.

Food industry:

Worldwide, there are few companies in the food market, among which are: Mondelez, a multinational conglomerate of confectionery, beverage, and food companies, made up of brands such as Kraft Foods, Chips Ahoy !, Oreo, Belvita, Social Club, Triscuit, and Barney; Milka, Toblerone, Côte d’Or and Cadbury Dairy Milk chocolates and candy and gum from the brands Chiclets, Trident, Stride, Halls and Cadbury.

Automotive industry:

The automotive sector in the United States is also dominated by oligopolistic companies, which concentrate the largest production, distribution and sales throughout the country, such as GM, Ford and Chrysler.

Credit cards:

This sector is also small worldwide and those known are few, such as MasterCard, Visa and American Express. In this market the companies that offer are few compared to the mass of people who demand their cards.

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