Definition
Oligopoly
An oligopoly is a market dominated by a few large firms whose decisions are interdependent, often leading to price rigidity, tacit coordination or fierce competition.
In an oligopoly, a handful of firms control most of the market, so each watches the others' pricing and output closely. India's telecom (Jio, Airtel, Vi), cement, aviation and paint sectors are classic oligopolies.
Oligopolists may compete hard on price (as in telecom tariff wars) or tacitly avoid price competition to protect margins. The CCI monitors them for cartel-like behaviour, since coordinated pricing harms consumers even without a formal agreement.
Related terms
- MonopolyA monopoly is a market with a single seller and no close substitutes, giving that firm power to set prices above competitive levels and restrict output.
- MonopsonyA monopsony is a market with a single dominant buyer, giving that buyer power to push prices and wages below competitive levels, the mirror image of a monopoly.
- Monopolistic CompetitionMonopolistic competition is a market with many firms selling differentiated products, each with some pricing power from branding but facing easy entry that erodes long-run profits.
- Game Theory in MarketsGame theory studies strategic decision-making among interdependent players, used to model oligopoly pricing, cartels, auctions and central-bank credibility.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.