What is a key feature of an oligopoly?

A key feature of an oligopoly is that a small number of firms dominate the market. In an oligopolistic market structure, these few firms have significant market power, which allows them to influence prices and output levels. This concentration of market share among a small group leads to interdependence, where the actions of one firm can directly impact the others, often resulting in strategic decision-making and potential collusion.

This contrasts with other market structures, such as perfect competition, where many firms operate, and no single entity has the power to influence the market. In monopolistic scenarios, a single firm controls the entire market. In oligopolies, however, because a limited number of firms are present, they must consider the potential reactions of their competitors when determining pricing strategies and product offerings. This unique feature of interfirm relationships and strategic behavior is what fundamentally defines an oligopoly.