oligopoly is a system that is part of the political economy that characterizes a market where there are few sellers to many buyers.
In an oligopoly, changes in the operating conditions of a company will influence the performance of other companies in the market. This provokes reactions that are more relevant when the number of companies in the oligopoly is reduced.
An oligopoly is characterized by:
- a state of hegemony, in which there is a struggle to achieve total supremacy;
- price inflexibility: prevailing prices are stabilized and competition is avoided;
- predominance of prices, with all sellers accepting the established prices;
- occurrence of actions together, often giving rise to trusts.
One trust it is an economic or financial coalition, a grouping of companies that aims to reduce and eliminate competition, dividing the market. When trusts are formed, competition is transferred to the area of quality and customer service, because there is no competition in terms of pricing.
In oligopoly, the creation of a
cartel, where the few dominant companies make an agreement to maintain the price of the marketed product. Both the carte and the trust exert pressure on the market. Unlike the trust, in the cartel the companies involved remain legally independent.The opposite of oligopoly is designated as oligopsony, a market where there are few buyers from a large number of sellers.
oligopoly and monopoly
both the monopoly how oligopoly contributes to imperfect competition. The difference between monopoly and oligopoly is that in monopoly there is only one supplier or seller, who dominates the market, while in oligopoly there are few suppliers of the same product.
When a product is considered essential to a country's economy, that country often establishes laws that prevent the creation of monopolies and oligopolies.
Oligopoly in Brazil
Perhaps the greatest example of oligopoly in Brazil is the telecommunications market, in which few companies control the market. In the case of mobile telephony, the merger of the companies TIM and Vivo was the first oligopoly in this area of the market.
Oligopolies are also known in the case of vehicle assembly, in the production of buses, for example, which can contribute to the increase in the price of public transport.