Oligopoly
An oligopoly is a market dominated by a small number of significant suppliers whose decisions are interdependent. A firm considers likely rivals’ responses to price, capacity, product or promotional changes. Products may be similar or differentiated, and entry barriers can sustain the structure. Outcomes vary: concentration alone does not establish collusion or a single inevitable price pattern.
Worked example
In a hypothetical market served mainly by three providers, one considers cutting prices. It assesses whether rivals will match the cut, how customers may switch and whether additional demand will cover lower margins.
Common mistake
Do not equate oligopoly with a cartel or assume rivals always avoid price competition. Strategic interdependence is the central feature.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | BT | Direct | September 2026–June 2027 |
| FIA | FBT | Direct | September 2026–June 2027 |