- High concentration reduces consumer choice.
- Cartel-like behaviour reduces competition and can lead to higher prices and reduced output.
- Given the lack of competition, oligopolists may be free to engage in the manipulation of consumer decision making.
Why are oligopolies difficult?
One important source of oligopoly power is barriers to entry. Barriers to entry are obstacles that make it difficult to enter a given market. … This means that new firms cannot enter the market whenever existing firms are making a positive economic profit, as is the case in perfect competition.
What makes oligopolistic firms different?
Oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence. … There is no precise upper limit to the number of firms in an oligopoly, but the number must be low enough that the actions of one firm significantly influence the others.
What are the advantages and disadvantages of oligopoly?
Advantages and Disadvantages of Oligopoly
- low level of competition;
- higher potential to receive big profits;
- products and services controlled through oligopolies are in great demand;
- a limited number of companies makes it easier for customers to compare products;
- easier for people to choose products;
- competitive prices;