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Prepare a list of characteristics of oligopoly.

Prepare a list of characteristics of oligopoly.

Solution

Oligopoly is a market with a few sellers of homogeneous or differentiated products, and its main characteristics are:

  1. Few sellers: each firm's market share is large enough to influence price and rivals.
  2. Interdependence of decision-making: each firm's price and output decisions provoke reactions from rivals — the defining feature.
  3. Importance of advertising and selling costs: firms spend heavily on marketing to protect or grow market share.
  4. Barriers to entry: large investment needs, economies of scale and brand loyalty keep new firms out, and prices tend to be sticky.

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