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Microeconomic Theory Pavitar Parkash Singh, Lovely Professional University

Notes
Unit-15: Theory of Oligopoly

CONTENTS

Objectives
Introduction

15.1 Features of Oligopoly

15.2 Behaviour of Oligopolistic Firms and Other Market Structures
15.3 Classification of Oligopoly

15.4 Why Bigness? Or What Causes the Emergence of Oligopoly?
15.5 Summary

15.6 Keywords
15.7 Review Questions

15.8 Further Readings

Objectives

After going through this unit, the students will be able to:
• Know the importance of oligopoly.
• Discuss behaviour of the market.
• Do the classification of oligopoly.
• Explain other forms of market.

Introduction

A form of market in which the competition takes place only between some firms, is a new and emerging
phenomenon. The number of goods producing firms is less and they compete with each other. Not in
local but often in international market the competition is so acute that economist often relates it with cut-
throat competition. This type of market is known as oligopoly market. Example: (i) There is an ongoing
competition between Coke, Pepsi and Canada Dry and some other soft drinks throughout the world. (ii)
There is a worldwide competition between General Motors, Toyota, Maruti Suzuki, Hyundai, Ford and
some other car manufacturers.
Lipsey has defined oligopoly as “Theory of imperfect competition among the few; it refers to an
industry that contains only a few competing firms. Each firm has enough market power to prevent
its being a price taker; but each firm is subject to enough inter-firm rivalry to prevent it considering
the market demand curve as its own.”

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