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What Are The Advantages And Disadvantages Of Oligopoly?

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Monica Stott Profile
Monica Stott answered
  • What is Oligopoly?

Oligopoly is a market or industry which is dominated by a small amount of sellers. This means that the small amount of sellers all tend to be aware of one another and what business decisions they are all making.

  • What are the advantages of Oligopoly?

One of the main advantages of Oligopoly is that the businesses have a lot of control because there are so few of them. Oligopoly businesses will often own more of the market that we see from the outside and if they are the main producer they can also drive their own competition and set standardized prices for a particular company.

Another advantage is that prices can become competitive if the customers are aware of who the main competitor is. It makes it easy for customers to do price comparisons and this forces the companies to set competitive prices.

  • What are the disadvantages of Oligopoly?

One disadvantage of an Oligopoly for the customers is if there is only one dominating company. When a company owns a massive share of the market they can almost set the prices to whatever they desire. This means that they can take advantage of the fact that customers have little option than to buy that product from them and may set the prices extremely high. This means that the customer will have to pay more for the product than they would if there were more competitors in the field.

Another disadvantage is the fact that the dominating company can become settled and will not think of new or creative ideas to improve their business. If they have no reason to improve or modernize the product because they have little competition the product will not evolve.
Anonymous Profile
Anonymous answered
First of all one needs to know what a market structure is before answering such a question. And by definition, market structures refer to firms that tend to behave alike.
They do include the following;
1.monopoly
2.monopolistic
3.oligopoly and
4. Perfect competition.

Oligopoly is a market structure where there are very few producers and many consumers
  advantages
*since there are few number of firms of producing a given product, they is competition and competition into production of quality products and services.
*there is also a high degree of collusion which results into combined efforts to produce better services.
*there is availability of information is a little bit easy in terms of costs as compared to a monopoly market structure
the level of advertisement is high and persuasive, this provides information to consumers, suppliers  retailers etc at easily.
*in such an industry there is easier entry and exit which is quiet better than that of monopoly which is blocked.
*the nature of products and services produced appear to be differentiated in such a way they create variety , this could due to branding and change of shape though the product remains the same.
*lastly but not the list there major goal is profit maximization they easily reach this goal  low
 
  disadvantages
will posted later be on the look out.
Anonymous Profile
Anonymous answered
Oligopolies in a market have several problems. Firstly, firms have extensive amounts of power and may even collude to set prices, which is illegal. For the consumer this means high prices accompanied by the possibility of a low quality product. It could be argued that it ends up being a less competitive market as smaller firms find it impossible to compete with these brand established firms.

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