Oligopoly is a market structure defined by dominance from a small number of interdependent firms facing high barriers to entry and producing either homogeneous or differentiated products. The core theoretical mechanism involves strategic interaction where firms face conflicting incentives to compete versus collude, often modeled through game theory frameworks such as the prisoner's dilemma that explain pricing equilibria like the cartel outcome versus non-cooperative outcomes. Collusion in this domain functions by limiting competition to maximize joint monopoly profits, though its stability is theoretically constrained by conditions including cost/demand heterogeneity, strong incentives to cheat, market size expansion, and recessionary pressures.
Oligopoly is a market structure defined by dominance from a small number of interdependent firms facing high barriers to entry and producing either homogeneous or differentiated products. The core th…