An oligopoly is an economic condition in which there are so few independent suppliers of a particular product that competitive pricing does not take place. Oligopoly is a form of market where there is domination of a limited number of suppliers and sellers called Oligopolists. A situation in which a particular market is controlled by a small group of firms.

An oligopoly is much like a monopoly, in which only one company exerts control over most of a market. In an oligopoly, there are at least two firms controlling the market. An oligopoly is a market dominated by a few large suppliers. The degree of market concentration is very high. Firms within an oligopoly produce branded products and there are also barriers to entry. Another important characteristic of an oligopoly is interdependence between firms. This means that each firm must take into account the likely reactions of other firms in the market when making pricing and investment decisions. This creates uncertainty in such markets - which economists seek to model through the use of game theory. The retail gas market is a good example of an oligopoly because a small number of firms control a large majority of the market. Economics is much like a game in which the players anticipate one another's moves. Game theory can also be applied in this situations as if decision makers must take into account the reasoning of other decision makers. It has been used, for example, to determine the formation of political coalitions or business conglomerates, the optimum price at which to sell products or services, the best site for a manufacturing plant, and even the behavior of certain species in the struggle for survival.

The ongoing interdependence between businesses can lead to implicit and explicit collusion between the major firms in the market. Collusion occurs when businesses agree to act as if they were in a monopoly position. KEY FEATURES OF OLIGOPOLY - A few firms selling similar product - Each firm produces branded products - Likely to be significant entry barriers into the market in the long run which allows firms to make supernormal profits. - Interdependence between competing firms. Businesses have to take into account likely reactions of rivals to any change in price and output THEORIES ABOUT OLIGOPOLY PRICING There are four major theories about oligopoly pricing: (1) Oligopoly firms collaborate to charge the monopoly price and get monopoly profits (2) Oligopoly firms compete on price so that price and profits will be the same as a competitive industry (3) Oligopoly price and profits will be between the monopoly and competitive ends of the scale (4) Oligopoly prices and profits are "indeterminate" because of the difficulties in modelling interdependent price and output decisions Distinct features of an oligopolistic market: - An oligopolistic market comprises a handful of firms, engaged in selling analogous products - All oligopolistic markets increase mutual dependence among the firms involved in similar competition. It also prepares businessmen to accept the outcomes arising from rivalries with respect to alterations in the production and prices of goods. - In near future, an oligopolistic market is likely to impose restrictions on admission, in an attempt to incur abnormal profits. - Each of the business houses involved with this market produces branded goods THE IMPORTANCE OF PRICE AND NON-PRICE COMPETITION Firms compete for market share and the demand from consumers in lots of ways. We make an important distinction between price competition and non-price competition. Price competition can involve discounting the price of a product (or a range of products) to increase demand. Non-price competition focuses on other strategies for increasing market share. Consider the example of the highly competitive UK supermarket industry where non-price competition has become very important in the battle for sales - Mass media advertising and marketing - Store Loyalty cards - Banking and other Financial Services (including travel insurance) - In-store chemists / post offices / creches - Home delivery systems - Discounted petrol at hyper-markets - Extension of opening hours (24 hour shopping in many stores) - Innovative use of technology for shoppers including self-scanning machines - Financial incentives to shop at off-peak times - Internet shopping for customers Price leadership: Oligopolistic market The dominance of one firm in the oligopolistic market results in price leadership. Firms having less market shares only follow the prices fixed by leaders. Oligopolistic competition: Effects - Oligopolistic competition in most cases leads to collaboration of the business firms on issues like raising the prices of various goods and subdue production process. - Under other given market conditions, the competition between the sellers acquires a violent form, on the grounds of lowering the prices and increasing the production. - Collaboration of various firms also brings about stabilization in the unsteady markets. PRICE LEADERSHIP IN OLIGOPOLISTIC MARKETS When one firm has a dominant position in the market the oligopoly may experience price leadership. The firms with lower market shares may simply follow the pricing changes prompted by the dominant firms. We see examples of this with the major mortgage lenders and petrol retailers. In reality, it is the Oligopoly market which exists, having a high degree of market concentration. This indicates that a huge percentage of the Oligopoly market is occupied by the leading commercial firms of a country. These firms require strategic planning to consider the reactions of other participants existing in the market. This is precisely why an oligopolistic market is subject to greater risk of connivances.
By: Schafaq Chohan
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers. Barriers to entry are high.

Since P>MC for an oligopoly, the output effect is that selling one more unit at the sales price will increase profit.

The price effect is that an increase in production will increase the total amount sold, which will decrease the price and decrease the profit on all other units sold.

• If the output effect is greater than the price effect, the owner will increase production.
• If the price effect is greater than the output effect, the owner will not increase production (and may even decrease production).
• Oligopolists will continue to increase or decrease production until these marginal effects balance.

To control the price of oil for the benefit of the producers. This is done by setting pricing and production targets to meet demand, thus avoiding either a shortage or surplus in world markets.

OPEC Mission Statement

"OPEC's mission is to coordinate and unify the petroleum policies of Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital to those investing in the petroleum industry."

Organization of Petroleum Exporting Countries



Algeria

Angola

Ecuador

Iran

Iraq

Kuwait

Libya

Nigeria

Qatar

Saudi Arabia

United Arab Emirates

Venezuela.

• Citgo
• Valero

I believe 7-11 is not renewing their contract with Venezuela.

Viper1

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I found this website that has a more complete listing, though they do have a disclaimer regarding the accuracy, as many oil companies shop around a lot.

http://citgoboycott.org/wheretobuygas.htm

Crimsondrac

A monopoly is a market structure in which there is only one producer/seller for a product. In other words, the single business is the industry. Entry into such a market is restricted due to high costs or other impediments, which may be economic, social or political. For instance, a government can create a monopoly over an industry that it wants to control, such as electricity. Another reason for the barriers against entry into a monopolistic industry is that oftentimes, one entity has the exclusive rights to a natural resource. For example, in Saudi Arabia the government has sole control over the oil industry. A monopoly may also form when a company has a copyright or patent that prevents others from entering the market. Pfizer, for instance, had a patent on Viagra.

In an oligopoly, there are only a few firms that make up an industry. This select group of firms has control over the price and, like a monopoly, an oligopoly has high barriers to entry. The products that the oligopolistic firms produce are often nearly identical and, therefore, the companies, which are competing for market share, are interdependent as a result of market forces. Assume, for example, that an economy needs only 100 widgets. Company X produces 50 widgets and its competitor, Company Y, produces the other 50. The prices of the two brands will be interdependent and, therefore, similar. So, if Company X starts selling the widgets at a lower price, it will get a greater market share, thereby forcing Company Y to lower its prices as well.

There are two extreme forms of market structure: monopoly and, its opposite, perfect competition. Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes. Perfect competition means there are few, if any, barriers to entry for new companies, and prices are determined by supply and demand. Thus, producers in a perfectly competitive market are subject to the prices determined by the market and do not have any leverage. For example, in a perfectly competitive market, should a single firm decide to increase its selling price of a good, the consumers can just turn to the nearest competitor for a better price, causing any firm that increases its prices to lose market share and profits.

Gyan Prakash Singh

MBA(IT)

er_gyanpsingh@yahoo.com