There are a few other small ones, but these four companies run roughly the entire market. For example, there are only 3 or 4 major cellular networks: Verizon, T-Mobile, Sprint, and AT&T.

Few, large firms - in an oligopoly, there are only a few firms (often less than 10).

Non-colluding oligopolies that practice what we refer to as price leadership - the firms compete and do not work together.

Colluding oligopolies, otherwise known as cartels - the firms communicate with each other and act as one unit.

There are two types of oligopolies that can exist: oligo-poly, oligopoly! Same reasoning can be applied to a mono- for one, poly: monopoly! Isn't Econ fun? It's fun right? I swear it's fun. Unlike monopolistic competition, there are high barriers and instead of many firms, there are only a couple firms.įun Fact! This comes from the Greek oligos for few and the suffix -poly, referring to a market or selling. Some good examples of the types of industries that fall in this type of market structure are the cereal industry, oil industry, and automobile industry. The AP Exam loves giving oligopoly problems, but they only really exist in one form, game theory problems.Īn oligopoly is an imperfect market structure where the industry is dominated by a few, large firms. While there is one graph, it's not required for the AP Exam and instead of just a good learning tool. Instead, we study oligopolies more mathematically using the tools of game theory and good old fashioned intuition.

What is an Oligopoly? Brief note before we get started! This section is oftentimes one of the trickiest for students because there aren't really any good graphs or pictures.

Example of game theory in real life