Firms operating under oligopoly are interdependednt in the decision making process. The reason for the same is that the number of firms operating and competing in the market are very few and any change in price or putput level by one firm will have a direct influence on the rival firms and as a result even the rival firms are forced to retaliate by changing in price and output. Thus, under oligopoly a firm not only consider its own demand curve but also of its rivals in the industry. Thus, no firm in oligopolist industry can fail to take into account the reaction of other firms to its price and output policies and therefore there is a strong interdependence among the firms under oligopoly.
2. Importance of advertising and selling costs:
Since the number of firms are very few in oligopoly market, each individual firms face intense competition from its rival firms and thus rely heavily on advertising of their products to lure the customers and enhance the demand of their own product. Thus, each firm employ aggressive and defensive weapons to gain a greater share in the market and to maximise sale. Unlike, perfect competition and monopoly market structure where advertisement and sales promotion are considered unnecessary, such expenditure is an extreme necessity of an oligopoist firm.(Varun, 2012)
3. Group behaviour:
Group behavior is another important feature of oligopolist market. Each firm under theis market str...
... middle of paper ...
...nomics/oligopoly/oligopoly-in-practice/collusion-and-competition/ (Accessed: 13th January, 2014).
• Geoff Riley (2012) Oligopoly – Collusion between Firms, Available at:http://tutor2u.net/economics/revision-notes/a2-micro-oligopoly-collusion.html(Accessed: 13th January, 2014).
• Varun (2012) 6 essential characteristic features of oligopolistic market, Available at:http://tutor2u.net/economics/revision-notes/a2-micro-oligopoly-collusion.html(Accessed: 13th January, 2014).
• Michael Parkin (2011) 'Markets in Action', in CFA Institute (ed.) Economics. Boston: Custom, pp. 38-54.
• Michael Parkin (2011) 'Oligopoly', in CFA Institute (ed.) Economics. Boston: Custom, pp. 112-128.
• Michael Parkin (2011) 'Market Structures: Perfect Competition', in CFA Institute (ed.)Economics. Boston: Custom, pp. 154-172.
• TR Jain (2008) Market Structures, New Delhi: University of Delhi.
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