Oligopoly Competition: Definition & Examples

Oligopoly Competition: Definition & Examples
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  • 0:05 Dominating the Market
  • 0:36 What Is Oligopoly?
  • 1:14 Characteristics of Oligopoly
  • 3:25 Lesson Summary
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Lesson Transcript
Instructor: Brianna Whiting
In this lesson we will explain what a competitive oligopoly is. We will then look at some prominent characteristics of an oligopoly as well as look at some examples.

Dominating the Market

Imagine you own your own business making children's shoes. After conducting some research, you soon find out you are one of three large firms that are currently dominating the children's shoe industry. While there are a few other smaller firms that produce these shoes, they are relatively tiny and have a difficult time competing against you and the other two larger firms. It is then that you realize you are a business owner operating in a competitive oligopoly.

What is Oligopoly?

So, what exactly does oligopoly mean? Well, an oligopoly is a market where only a few firms make up the entire industry. These firms have all the control over important factors like price. Often, the products of all the dominating firms are extremely alike, which forces the firms to become interdependent and closely monitor the actions of the other firms they are competing against.

This type of market also creates barriers to enter the industry for outside competition. It is often quite difficult for other firms to enter into the market because of barriers like patents and government restrictions.

Characteristics of Oligopoly

Now that we know the basic definition of a competitive oligopoly, let's look a little deeper and define some main characteristics of an oligopoly. The following are prominent characteristics of a competitive oligopoly:

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