What is an oligopoly?

Coming from the Greek, "oligo", few, and, "polio", seller, when in a market there is a small or limited number of producers, compared to all the plaintiffs, it is understood that there is an Oligopoly. Also in this case, the oligopolists are in a privileged situation, which allows them to obtain a greater margin of maneuver when selling their products or services in the market. Although it is not as effective as the case of monopoly, in terms of the possibility of controlling prices and quantity produced, essential to the system is the fact that oligopolists collaborate with each other to control them.

The reason is that everyone wins and the small number of sellers implies that all of them have their production sold. The oligopoly can affect both materials or resources, such as processed products. The markets where the oligopoly triumphs are usually markets that have important entry barriers. In these types of markets, when there is no agreement, or the presence of oligopolists, it could happen that the most powerful oligopolist or oligopolists practice dumping against other, less powerful oligopolists to remove them from the market. It would be a situation in which a monopoly or a reduction in the number of oligopolists is sought

El dumping it is a practice that consists of lowering prices even below production costs. Some of the markets in which the oligopoly of supply tends to occur are energy markets, such as electricity or oil.

Types of oligopoly

Within the oligopoly there are usually three scenarios in common.

We are talking about the situation in which there is a market leader and the other oligopolists follow him. This situation is also called the Stackelber model. In this model, each of the participants must take into account the possible reaction of the rest for each level of quantity and price. One can also speak of the so-called Courtnot model, for the case in which the oligopolists decide to choose the quantities simultaneously, or the Bertrand model, for the case in which the oligopolists decide to choose the prices simultaneously.

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