What is the Meaning of: Oligopoly | Concept and Definition of: Oligopoly
When a market is dominated by a small number of producers/sellers providers (oligopolistes), told that there is an oligopoly. This word is of Greek origin and is formed by two concepts: trace ("few") and polio ("seller"). That said, oligopoly precisely means "few sellers or few sellers."
Because there are few participants in this kind of market, each oligopoliste is aware of the actions of others. However, the decisions of one of them necessarily committed the decisions of others. The oligopolistes take advantage of their privileged position to set higher prices while producing less. This type of businesses work together to preserve this power and to avoid competition.
The operation of an oligopoly is explained by the methods of the theory of games. Pertaining to the functions of costs of the undertakings concerned, each of them offers its products at a certain price and a specific amount. Buyers, them, determine what is the quantity actually applied for each company, giving a certain level of benefits to producers/vendors.
Producers/vendors may also try to differentiate their products compared to other companies, so consumers choose and will want to buy.
After the theory of games, each producer decisions depend on, also the decisions of the competition. This is usually represented by a curve of reaction (or better answer). In the hypothetical case where all business response curves crossed at one point (intersection), all these decisions result then told the balance of the game.