INTRODUCTION

An oligopoly is a market form in

which a market or industry is
dominated by a small number of
sellers (oligopolists). The word is
derived from the Greek oligo 'few'
plus -opoly as in monopoly and
duopoly. Because there are few
participants in this type of market,
each oligopolist is aware of the
actions of the others. The decisions
of one firm influence, and are
influenced by, the decisions of other
firms. Strategic planning by
oligopolists always involves taking
into account the likely responses of
the other market participants. This
causes oligopolistic markets and
industries to be at the highest risk
for collusion.

Firms often collude in an attempt to

stabilize unstable markets, so as
to reduce the risks inherent in these
markets for investment and product
development. There are legal
restrictions on such collusion in
most countries. There does not have
to be a formal agreement for
collusion to take place (although
for the act to be illegal there must
be a real communication between
companies) - for example, in some
industries, there may be an
acknowledged market leader which
informally sets prices to which
other producers respond, known as
price leadership.

CHARACTERISTICS OF AN OLIGOPOLY
MARKET.
 Few sellers offering similar or
identical products
 Interdependent firms
 Best off cooperating and acting
like a monopolist by producing a
small quantity of output and
charging a price above marginal
cost
  There is a tension between
cooperation and self-interest.

There is no single theory of how

firms determine price and output
under conditions of oligopoly. If a
price war breaks out, oligopolists
will produce and price much as a
perfectly competitive industry
would; at other times they act like
a pure monopoly. But an oligopoly
usually exhibits the following
features:
1. Product branding: Each firm in
the market is selling a branded
(differentiated) product
2. Entry barriers: Significant
entry barriers into the market
prevent the dilution of
competition in the long run which
 maintains supernormal profits
for the dominant firms. It is
perfectly possible for many
smaller firms to operate on the
periphery of an oligopolistic
market, but none of them is large
enough to have any significant
effect on market prices and
output
3. Interdependent decision-
making: Interdependence means
that firms must take into
account likely reactions of their
rivals to any change in price,
output or forms of non-price
competition.
Advantages of Oligopoly
1 It offers simple choices:
With only a few businesses
offering products or services, it
will be easy for consumers to
compare and choose the best
option for their needs. In other
types of market, it can be very
challenging to thoroughly look
into all the things offered by a
huge group of companies and then
compare prices.
2. It generates high profits:
competition in oligopoly, the
businesses involved in it enjoy the
benefit of bringing in huge amounts
of profits. Generally, the
products and services controlled
through this type of market are
highly needed by a large majority
of consumers.
3. It offers better information,
products and services:
 Along with fair price competition,
competition among products also
plays a huge role in this market
structure, where every business
would scramble to come out with
best and latest items to attract
consumers. The same goes to the
amount of information, advertising
and support offered to consumers.
4. It creates competitive prices:
As already implied, the ability to
easily compare prices coerces
business to keep their prices in
competition with their competitors.
This is a great perk for consumers,
as prices could continually go down.
Disadvantages of Oligopoly
1. It offers fewer choices:
In many cases, choosing the best
brand in an oligopoly is like going
for the least evil. This means that
consumers would have very limited
options for the products or services
they are looking for.
2. It makes it difficult for smaller
entities to establish a spot in the
market:
For smaller enterprises and
creatives, their outlook for
business in this type of market is
grim, as only the extremely
advanced and large companies have
complete control over market. This
makes it nearly impossible for
smaller and new entities to break
into the market.
3. It eliminates motivation to
compete:
Generally, companies in oligopoly
become very settled with their
ventures, as their operations and
profits are guaranteed. This means
that they would no longer feel the
necessity to create new innovative
ideas.
4. Its fixed prices can be bad for
consumers:
While competitive prices are good,
they are rarely far apart from
those of other companies they could
go with, as businesses agree to fix
prices, where there is a set limit for
how low prices could go.

Types of Oligopoly

 Pure or Perfect:
One of the types of oligopoly is the
perfect oligopoly. This occurs when
the product is homogeneous in
nature (e.g. Aluminum industry).
  Differentiated or Imperfect:
Another of the types of oligopoly is
an imperfect oligopoly. This occurs
when product differentiation exists
(e.g. Talcum powder industry).

 Open and Closed:

 Open – New firms can enter the
market and compete with the
existing firms.
 Closed – Entry into the market is
restricte
 Collusive and Competitive:

 Collusive – This occurs when few

firms come to an understanding
with respect to the price and
output of the products.
 Competitive – This occurs when
there is a lack of understanding
between the firms and
they invariable compete with each
other.
 Partial or Full:

 Partial – This occurs when one

large firm dominates the industry.
Also, this firm is the price leader.
 Full – This occurs when there is no
price leadership in the market.

CONCLUSION

The Indian oil & gasoline industry

is an oligopoly. An oligopoly is a
market form in which a market or
industry is dominated by a small
number of sellers. The word is
derived from the Greek for few
sellers. Because there are few
participants in this type of
market, in this case we have four
major govt.owned oil companies
and one private company
(Reliance).Each oligopolist is
aware of the actions of the
others. The decisions of firm
influence, and are influenced by
the decisions of other firms.
Strategic planning by oligopolists
always involves taking into
account the likely responses of
the other market participants.
This causes oligopolistic markets
and industries to be at the highest
risk for collusion.
Name : Paras Metha
Class : FY.BMS (A)
Rollno: 418060
Project : Oligopoly market.
Reference
 www.wikipedia.com
 www.eduworld.com
 www.bookiepedia.com
 www.investigator.com