What is an oligopoly in business

Oligopoly

The oligopoly is a form of market in which a few relatively large suppliers face a large number of customers (demand). If there are only a few inquirers versus a large number of suppliers, one speaks of an oligopsony. The market behavior of an oligopolist depends not only on its demand segment, but also on the behavior of the other oligopolists, just as it is, conversely, influenced by its actions.

The oligopoly is a market form with a few, mostly large providers; it stands between monopoly and polypol. Oligopoly is also a market form in which only a few large providers offer a (homogeneous or heterogeneous) product. With this type of market, each of the suppliers can determine their own sales prices more or less freely, depending on the degree of heterogeneity of the product. See also: heterogeneous oligopoly, homogeneous oligopoly.

An oligopoly exists when a few market participants have a large market share. There are two types of oligopoly: 1. the supply oligopoly and 2. the demand oligopoly. The supply oligopoly can be opposed to a demand monopoly, a demand oligopoly or a demand oligopoly. In the same way, a demand oligopoly can meet a supply monopoly, a supply oligopoly or a supply polypole.

The most striking example of a supply oligopoly in the Federal Republic is the mineral oil market.

Within the framework of the morphological market form scheme, the oligopoly is characterized by the number and size of suppliers and buyers, with a few medium-sized suppliers (buyers) facing a few medium-sized or many small buyers (suppliers). While in a perfect market one speaks of an oligopoly, in an imperfect market it is an oligopoloid.
According to R. Frisch and E. Schneider, oligopolistic behavior is used when a supplier expects his sales to depend on the (price) measures of the other companies and he reckons with repercussions from his competitors as a result of his measures.

Origin of the word: contraction of the Greek oligo (few) and monopoly. The predominance of a few suppliers in a market with great demand, intermediate form between monopoly and polypol.

For example, there are only a few automotive companies but a large number of car buyers.

Market form characteristic of the German banking system, in which only a few relatively large institutions or groups appear on the side of the providers - banks, banking groups. Insofar as there are also small banks without market influence, they follow the market policy line of the large ones.

In economic sociology: Designation of the economy for a form of market in which a few, mostly large suppliers of goods (companies, groups) face a large number of barely organized buyers. A special form of the O. is the duopoly, in which two providers compete. Compared to other forms of market, the oligopoly is characterized by strong interdependencies between the actions of the oligopolists, which in theory have led to particular consideration of strategic problems (game theory).

The oligopoly is a form of market in which a few providers find themselves in a perfect or imperfect market. Possible behaviors and strategies of the oligopolists are examined in the oligopoly theory. There is a particularly high level of action-reaction connection between the oligopolists in the case of a narrow oligopoly, and correspondingly lower connections in the case of a large oligopoly.

The oligopoly is a differentiated market form in classical price theory and competition law, in which two or more companies are exposed to either no or only minimal competition from small companies (market form scheme). According to the presumption of oligopoly in Section 22 (2) GWB, an oligopoly is presumed in antitrust law if either three or fewer companies have a market share of 50% or more or five or fewer companies together have a market share of 2/3 or more. The law provides for a minimum turnover limit of EUR 100 million. In terms of competition theory, the assessment of oligopoly offenses is still uncertain; According to conventional understanding, the particular danger of the oligopoly is based on the uniformity of the appearance of the ogopoly members (behavior in parallel); This is based on the predictability of the behavior of the oligopoly members and the consideration of their reactions in their own strategic market measures. If there is a dominant oligopoly, this means that each individual oligopoly member is considered to be dominant in the market and is therefore subject to abuse control over dominant companies.
Partial oligopolies are used when there are not only a few large oligopolists but also smaller but not market-determining providers operating on the market.

See also market forms, price leadership, dyopoly (duopoly), monopoly, polypol, market behavior

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