An oligopoly is a market that is dominated by a small number of firms. The number of firms considered an oligopoly depends on the size of the market. An oligopoly exists where a small number of firms relative to the size of the market have a collective market share of more than 90%. Oligopolies are extremely common and tend to emerge in any industry with high capital requirements or where production greatly benefits from economies of scale. The following industries are dominated by oligopolies on an international basis.
The following are often a oligopoly on a national or regional basis:
Credit Rating Agencies
International Sporting Events
Oil & Gas
Resources such as Diamonds
Technology such as Hard Drives or Memory
Big Box Retail
Fast Moving Consumer Goods
NotesThe rule of three predicts that many markets will be dominated by three firms.A market dominated by a single firm is a monopoly.Oligopolies benefit consumers where they are fiercely competitive and efficient due to economies of scale.Oligopolies create a temptation to engage in anti-competitive practices such as price fixing. As such, they must be closely monitored by governments.Organizations that are ostensibly non-profit may act in commercially aggressive ways such that they resemble a monopoly or oligopoly.
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