Market competition

#2. Oligopoly in Market Competition

As we have learned that monopoly is one firm controlling the whole market and opposite to it oligopoly is when a market is controlled by two or more than small companies. In the oligopoly market, the actions of one company ha no significant influence on the other companies in the market.
Oligopoly is also not favorable for consumers as in oligopoly market price can be high because these companies decide prices mutually or under the leadership of one company.
As all companies have equal market share, they don’t put extra efforts to get a competitive edge over the other companies which results in the slow innovation in the industry.
In addition to this, it is difficult for a new entrant to enter the market because the group of small companies has control over the suppliers and raw material required to produce products.
In this way, these companies make much higher profits as they would have made in the competitive market. All these factors are not favorable for the consumers.
Oligopoly market competition is usually seen in the oil industry, steel industry, tire manufacturing industry, grocery store chains, railroads, and wireless carrier industry. There are various reasons which cause oligopoly market competition.

1. 
   The high cost of entry in the market.
   
2. 
   legal privileges required to enter the market (for example, the license is required to use wireless spectrum.)
   
3. 
   the requirement of a high number of customers to existing in the market.
   

Oligopoly market competition exists because companies decide to rather than competing with one another to live in harmony and earn profit by co-operation.
These companies either rises or reduces prices by mutual decision or they simply follow one leader, and if that leader rises the prices, then all other companies also raise the price.
Oligopoly is also not favorable for consumers as in oligopoly market price can be high because these companies decide prices mutually or under the leadership of one company.
As all companies have equal market share, they don’t put extra efforts to get a competitive edge over the other companies which results in the slow innovation in the industry.
The government makes policies in such a way so that no company can gain a monopoly and each competitor has its market share.
In this way, these companies make much higher profits as they would have made in the competitive market. All these factors are not favorable for the consumers.