The Advantages and Disadvantages of an Oligopoly

An oligopoly is a market in which there are only a few sellers. There are both advantages and disadvantages to this kind of market which I think is important to consider because there are many oligopoly markets that we interact with every day.

The first benefit of an oligopoly is that there are only a few sellers which enable consumers to compare their choices easily. In this way, consumers aren't besieged by large amounts of products from a variety of different companies. Rather, an oligopoly offers limited choices which make it easy for the consumer to pick and choose which service and/or product they want.

Another benefit is producers are able to generate high profits. Since there are only a few producers and there is no easy entry into an oligopoly market, companies that are a part are able to make a large amount of money since they control a large share of the market. In other words, each firm is a "price maker" and if companies work together, they can generate large revenue.

The costs of an oligopoly are related to the benefits. To begin, although an oligopoly offers a few choices for consumers which makes it easy to pick and compare products, this is also a limiting restraint on consumers' choices. In a way, it is like choosing the lesser evil if a consumer doesn't like any of their choices. If a consumer really needs a product that is controlled/produced by companies in an oligopoly market, they don't have much choice or flexibility in finding a good price or deal for that product.

Another disadvantage to oligopolies is that it is hard for smaller firms to establish a place in the market. With large companies that control the majority of the market, smaller firms are often bought out to reduce competition.

Overall, there are several benefits and costs to an oligopoly, both to consumers and producers, which is interesting to consider. As I said before, there are several examples around us, including automobile manufacturing, television providers, and cell phone companies.



Sources:
https://medium.com/@birdchain_io/oligopolies-arent-good-for-anyone-4134635f45f7
https://connectusfund.org/oligopoly-advantages-and-disadvantages

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