oligopoly
noun
, ˌō-\
Definition of oligopoly
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Other Words from oligopoly
, ˌō- \
noun
, ˌō- \
adjective
Examples of oligopoly in a Sentence
Recent Examples on the Web
In particular, monopolies and oligopolies (when a few large competitors control a market) helped explain one of the biggest mysteries of the current economy: why low unemployment had not led to commensurately higher wages. — Sheelah Kolhatkar, The New Yorker, "How Elizabeth Warren Came Up with a Plan to Break Up Big Tech," 20 Aug. 2019 At the Fortune 500 level, most corporations operate in situations of oligopoly. — Edward Lotterman, Twin Cities, "Real World Economics: Playing monopoly is more than just rolling the dice," 16 June 2019 Recently, the Endocrine Society railed against the prices of insulin, which have been raised in lockstep by an oligopoly of three pharmaceutical manufacturers. — Eric Topol, The New Yorker, "Why Doctors Should Organize," 5 Aug. 2019 But monopolies and oligopolies are like corporate power on steroids. — Sally Hubbard For Cnn Business Perspectives, CNN, "Monopolies are killing the American Dream. We must keep them in check," 1 July 2019 Just as oligarchy was government by a few powerful nobles, oligopoly is a market dominated by a few powerful businesses, usually corporations. — Edward Lotterman, Twin Cities, "Real World Economics: Playing monopoly is more than just rolling the dice," 16 June 2019 Pickup prices routinely exceed $45,000, roughly 35% more than the typical automobile, due in part to Detroit’s oligopoly that allows the Big Three to expect a handsome premium. — John D. Stoll, WSJ, "In Auto Tariffs, a High-Stakes Game of Chicken," 25 May 2018 Barclays automotive analyst Brian Johnson has described the Detroit Three’s lock on the market as an oligopoly. — Mike Colias, WSJ, "Prices of Pickup Trucks Charge Into Luxury-Car Territory," 11 Feb. 2019 In freer places, upstarts are challenging oligopoly as much as officialdom. — The Economist, "Latin America’s new media are growing up," 14 July 2018These example sentences are selected automatically from various online news sources to reflect current usage of the word 'oligopoly.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
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More Definitions for oligopoly
oligopoly
nounFinancial Definition of oligopoly
What It Is
An oligopoly is an economic market whereby a small number of companies or countries generate and control the entire supply of a good or service.
How It Works
Let's assume that Company XYZ, Company ABC, and Company 123 produce 95% of the country's carrots. If Company XYZ raises the price of its carrots, consumers may choose to buy from Company ABC and Company 123 instead. But if Company ABC and Company 123 decide to follow Company XYZ's lead and raise their prices, the three companies can essentially control the entire carrot market through their power to set prices.
In a truly competitive market, the three companies would not have this luxury--they would probably have to either lower their prices or differentiate their products to stay in business. Companies in an oligopoly are keenly interested in what the other members of the oligopoly will do next. The goal of a company involved in an oligopoly is to increase profits by attempting to monopolize the market by finding and maintaining competitive advantages.
Economies of scale often lead to oligopoly-like conditions because they discourage new competitors from entering a market. Consider how capital intensive it is to enter the airline business or the soda business (industries are commonly thought of as oligopolies). And because there is so little of the market available to competitors, new entrants to an oligopoly rarely succeed.
Why It Matters
Although uncommon, oligopolies can quickly turn into cartels, which are groups of companies that agree to influence prices by controlling the production and sale of a good or service (one of the world's most well-known cartels is the Organization of Petroleum Exporting Countries--OPEC). The companies essentially collude to control supply and prices. This is why prices in oligopolistic industries are usually higher than markets that allow greater competition.
Oligopolies and cartels are hard to maintain in the long term. Federal antitrust laws, most notably the Sherman Act, make cartels and collusive activity illegal in the United States. Also, disagreements within cartels regarding output may cause a break up of the group. In addition, consumers often become sensitive to the increased prices.
Source: Investing Answers
oligopoly
noun
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