Explain the concept of oligopoly and its characteristics.
Definition of oligopoly
Characteristics of oligopoly
Models of oligopolistic behavior
Oligopoly is a market where the majority or at least a very large proportion of sales are in the hands of a small number of suppliers.
In oligopoly, there is interdependence between suppliers, which means that the actions of one supplier affect the others.
Oligopolies can be formed through mergers and acquisitions or through barriers to entry, such as high investment costs that small companies can hardly afford.
Oligopoly can also occur when there are small companies, but the market is so strongly dominated by a few companies that buyers often do not have the possibility of buying from small companies.
The cartel is a model of oligopolistic behavior that seeks to maximize the benefit of the group of companies, generally establishing some form of market distribution and avoiding competition through price reduction.
The formation of cartels - price agreements between oligopolists - is prohibited by the Competition Defense Law.
The oferente leader is a model of oligopolistic behavior in which one of the companies takes the lead in setting prices, and the others follow suit.
Dumping is a practice in which a company sells below cost with the aim of displacing competitors from a market.
In the oligopoly, the elasticity of the demand curve faced by the individual supplier and, therefore, its market power, will depend largely on the freedom that the buyer has to stop buying from them.