What is characteristic of an oligopoly?

In an oligopoly, the market is characterized by the presence of a few large producers that dominate the industry. This concentration of market power allows these firms to influence prices and output levels, as their decisions are interdependent compared to a competitive market where many small firms operate independently. Because there are only a limited number of players in the market, the actions of one firm—such as changing prices or altering production levels—can have a significant impact on the others.

This structure leads to strategic interactions among the firms, where they may engage in practices like collusion or price-fixing to maximize their collective profits. Additionally, it is common for firms in an oligopoly to have a product that can either be homogeneous (identical products) or differentiated (products that are similar but not identical), which impacts their pricing strategies and competitive behaviors.

In contrast, other potential market structures describe a vast array of producers (like in perfect competition), a single firm with complete control (characteristic of monopoly), or homogenous products in a competitive market. The defining element of an oligopoly is indeed that a few large producers dominate the market.