Main types of oligopoly



Pure Oligopoly

If you're looking to get into the world of oligopolies, one of the first things you'll need to know is that there are several different types of pure oligopoly. A pure oligopoly has four characteristics:

  • The market is dominated by a few firms; there are only a few firms in the market.
  • The firms are differentiated; they sell products with different features and benefits, or they serve different markets. For example, Apple and Microsoft both have smartphones but they have very different operating systems and user experiences.
  • The firms do not collude; they don't secretly cooperate in order to prevent competition from other companies from entering their market space or driving up prices for consumers.
  • There aren't many substitutes for these goods; if consumers really want these goods then they'll keep buying them even if prices increase dramatically over time (like cigarettes). This means that companies will likely keep producing at high amounts without worrying about losing customers because people don't have many other options when choosing what type of product should go into their home/office/etcetera...

Differentiated oligopoly

Differentiated oligopoly is a type of oligopoly in which there is a differentiation of products. Differentiation can be achieved through branding, advertising, price, product differentiation, and packaging. The most common example would be consumer goods such as toothpaste or Coca-Cola where the different brands are said to appeal to different consumer tastes (i.e. Colgate vs Crest). Another example would be high-end fashion houses like Gucci or Chanel which charge higher prices than mass-market clothing retailers like H&M or Zara because they offer more exclusive designs and quality materials which boosts their image among consumers who want something different from what they can get at every store on Main Street USA.

Collusive oligopoly

A collusive oligopoly is a type of oligopoly in which firms collude to maximize profits. Collusion is illegal in the United States, but legal in most European countries, including France and Germany. In a collusive oligopoly, the firms involved will agree on a price that they all charge their customers and then divide up markets so that each firm gets its fair share of profits.

Non-collusive oligopoly

In a non-collusive oligopoly, there are many firms in the market, but they are not colluding to control the market. This means that firms are independent and are not working together to manipulate prices or restrict supply.

Examples of non-collusive oligopolies include:

  • Airlines (American Airlines and Delta Air Lines)
  • Newspapers (New York Times, Washington Post)

Product expansion & contraction oligopoly

Product expansion & contraction oligopoly is a type of oligopoly where the number of firms in the industry changes over time. In other words, it's an industry where one or more firms can enter or exit the market.

The number of firms in this type of oligopoly may increase or decrease over time. For example, if all existing firms in an industry exit and new ones join, we would say that product expansion occurred because there were no longer any existing firms. If all existing firms exit and new ones enter, we would say that product contraction occurred because there were now more than 1 firm participating in production (though not necessarily producing).

Concentrated oligopoly

A concentrated oligopoly is the fourth type of oligopoly.

Firms have similar products and target the same market. There are only a few firms in this market due to high barriers to entry (high costs or difficulties). Therefore, the firms have a small percentage of the market share because new entrants cannot enter easily. An example of this is Microsoft Corporation which has about 95% desktop operating system share worldwide; that’s nearly all computers!

Integrated oligopoly

In an integrated oligopoly, a few firms produce both the product and all of its inputs. For example, if you're producing shoes and you need leather to do so, you might buy one of the tanneries that process leather. When this happens, you have vertical integration in your industry because your firm is now involved in more than one step of production (you're what economists call vertically integrated).

Integrated oligopolies are still considered to be part of the pure competition because each firm has no significant control over how much other firms charge for their products or what they do with their outputs after they've produced them.

Conglomerate oligopoly

Conglomerate oligopoly is a form of oligopoly in which one or more firms in an industry produce a good or service that is complementary to the good or service produced by another firm in the industry. For example, a car manufacturer may produce tires for its vehicles and sell them to consumers. In this case, tire producers are considered complementary products and therefore could be part of a conglomerate oligopoly.

Mixed oligopoly

A mixed oligopoly is a combination of the pure monopolist and pure competitor. It is not as stable as pure monopoly or pure competition because there are a small number of firms in the market.

In this structure, the behavior of firms depends on their competition level. If they compete with each other, then they will try to maximize their profits by increasing the output price until it equals marginal cost at that output level. For example:

If firm A produces 10 units and charges $100 per unit while firm B produces 8 units and charges $80 per unit; then both A and B have advantages over one another because they can make more profit by producing more units than what they would if they were competing against each other in an industry where there were no barriers to entry for new firms entering into production (such as patents).

Staggered/cyclical oligopoly

  • Staggered oligopoly: This is where firms enter and exit the market in a staggered fashion. For example, let's say there are four firms that control 80% of the market. Firm A has 30% of the market share, B has 20%, C has 15%, and D has 15%. If you were to ask an economist (or me) to predict how much each firm would sell if they all entered at once, we would predict 100% because there’s no reason for them not to do so. But that’s not what happens! Instead, A enters first at 31%, B enters second at 21%, C enters third with 14%, and D enters last with 13%. What happens now? Well now instead of having 100% market share, you have 92%. The same thing happens continuously until eventually everyone is gone except for one firm that dominates everything else in terms of sales volume or revenue generation.
  • Cyclical oligopoly: In this case, multiple firms enter simultaneously but then fall out of existence over time due to poor performance or lack of profitability within this type of industry structure which results in higher entry barriers than exit barriers."

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