Oligopoly in the US Economy

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Oligopoly in the U.S. Economy Introduction Oligopoly is defined as a market structure in which there are a few major firms dominating the market in an industry. One of the defining factors is that each firm explicitly feeds off of the competitors' moves and their potential responses in regard to setting prices, launching new products, etc. Under this model there is a level of implied cooperation. The firms understand that it is in their own best interests to maintain a stable price. If one of the firms subsequently lowers their prices, their competitors will do the same and knock out any advantage the original firm was hoping to gain with lower prices. However, if they raise their prices, the competitors may not do the same and can keep their prices fixed which will allow them to gain more market share. Another key factor in oligopolies is that there are significant barriers to entry in the industry. These barriers are constructed by factors such as high fixed costs, availability of resources, and brand loyalty. Smaller firms that wish to enter the market will not have the necessary resources to compete with these large firms. Also in the oligopoly structure, market shares generally change very little from year to year. Many of the gains made in market share are through acquisitions of smaller competitors in the industry which are then consolidated into the parent firm. Example of Oligopoly Many argue that an example of an oligopoly market structure many be provided
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