Page 1 - Lession Note - Main Mkt Forms-76
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Class-XI

                                                  Microeconomics


                                                    CHAPTER-10


                                Topic –MAIN MARKET FORMS (Module-76)

                                       Sub topic :   Features of oligopoly


               Short note

               Oligopoly- Meaning:
               The term oligopoly is derived from two Greek words: ‘oligoi’ means few and
               ‘poleein’ means ‘to sell.’ So it is a is a market situation in which an industry has
               only a few firms (or few large firms producing most of its output) mutually
               dependent for taking decisions about price and output.

               Types of Oligopoly:
               (a) Pure or Perfect Oligopoly:
               In the case of pure oligopoly, firms produce homogenous products like copper,
               iron, steel and aluminium.



               Imperfect or Impure or Differentiated Oligopoly:
                In differentiated oligopoly, firms produce differentiated products such as toilet
               soap, cigarettes or soft drinks.
               Collusive Oligopoly: If the firms cooperate with each other in determining price or
               output or both, it is called collusive oligopoly or cooperative oligopoly.
                Non-collusive Oligopoly: If firms in an oligopoly market compete with each other,
               it is called a non-collusive or non-cooperative oligopoly.
                Features of Oligopoly
               (a) Few Large Sellers:
               (i) The number of sellers in an oligopoly market is small – when there are two or
               more than two, but not many sellers.
               (b) Interdependence of Decisions:
               Interdependence means that actions of one firm affects the actions of other firms.

               (c) Non-Price Competition:
                Oligopoly firms try to avoid price competition for the fear of price war. They use
               non-price competition methods like better services to customers, advertising, etc.
               to compete with each other.
               (d) Barriers to the entry of firms:
                The main reason why the number of firms is small is that there are barriers which
               prevent entry of firms into industry.
               (e) Role of selling costs:
               Due to severe competition and interdependence of the firms various sales
               promotion techniques are used.
               (f) Oligopoly firms may produce either a homogeneous or a differentiated product.
               (g) Group Behaviour:
               In an oligopoly situation, there are a few firms who control the entire market and
               each firm recognizes interdependence in their decision-making. So, price-output
               decisions of a particular firm directly influence the competing firms.

               (h) Indeterminate demand curve facing an oligopoly firm: The most distinguishing
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