An oligopoly is a form of market structure where there are only a few sellers of a product or service These firms typically have a large market share and the ability to influence prices and output decisions. This type of market structure is characterized by mutual interdependence, because decisions made by one firm will affect its competitors.
Oligopolistic firms are able to exert some degree of control over pricing and output, by coordinating their actions and coordinating with each other. Furthermore, they have the incentive to enter into cartels, which is when a group of firms decides to work together to fix prices and divide up the market. This type of collusion is illegal in many countries.
The five best examples of oligopolistic firms are:
1. The United States Automobile Industry—This oligopoly is made up of the “Big Three” automakers in the United States: General Motors, Ford, and Chrysler. These three companies control around 75% of the US automobile market and have a large influence on the price and production of cars.
2. The United States Oil and Gas Industry—This oligopoly is composed of five major companies: ExxonMobil, Chevron, BP, Royal Dutch Shell, and ConocoPhillips. Together, these companies dominate the production and distribution of oil and gas in the US and control over 60% of the global market.
3. The European Airline Industry—This oligopoly is made up of four major airline companies: Ryanair, Lufthansa, Air France, and British Airways. Together, these companies make up around 90% of the airline industry in Europe.
4. The Chinese Telecommunications Industry—This oligopoly is made up of three major players: China Mobile, China Unicom, and China Telecom. These three companies control the majority of the mobile telecommunications market in China, making them a powerful force in the industry.
5. The Global Soft Drink Industry—This oligopoly is largely controlled by the two major corporations, Coca-Cola and Pepsi. Together, these two companies dominate the global market for soft drinks, controlling over two-thirds of the market.
These five examples demonstrate how oligopolies can exercise a great deal of control over prices, production, and distribution in their respective industries. Oligopolies can be beneficial for both consumers and businesses, but they can also lead to anti-competitive practices, such as collusion and price fixing, so it is important to keep an eye on them.