OLIGOPOLY

Class-04
INTRODUCTION
 Oligopoly is an important form of imperfect
competition.
 Markets with two sellers are called Duopoly.

 Market with small number of sellers but greater

than two are called Oligopoly.
 Oligopoly market has few sellers and many
buyers.
 Products are close substitutes.

 Firms are interacting strategically.

 Firms are interdependent to each other.

FEATURES OF OLIGOPOLY
 Interdependence of Sellers: The sellers are
mutually interdependent to each other. This
means price and output decisio f one seller affect
the sales of other.
 Homogeneous or Differentiated products:
Both kinds of products homogeneous and
differentiated are being sold in oligopoly market.
 Advertising and selling cost: Oligopolists have
higher advertisement and selling cost to attract
customers in orde to get higher market share.
FEATURES OF OLIGOPOLY
 Conjectural Variation: In oligopoly market,
firms are interdependent,the profit of a firm
depends on the output produced by other firms.
So in order to maximise profit the firms has to
know the output of other firm or at least guess.
That means the firms has to guess the reaction of
other firm. Naturally there are variations in the
reactions of other firms. This variation is known
as conjectural variation.
EXAMPLES
 Mass media
 Telecom Industry

 Airlines examples