The term "oligopoly" comes from the Greek words oligos (several) and poleo (sell).

An oligopoly is a market structure in which most of the production and sales are carried out by a small number of relatively large enterprises. Sometimes it is also defined as "market of the few" or "competition of the few". Let us dwell on the most significant characteristics of the oligopolistic market.

Not a large number of firms in the industry.

A fundamental consequence of the small number of firms in the market is their special relationships, which are manifested in close interdependence and intense rivalry between enterprises. Unlike perfect competition or pure monopoly in an oligopoly, the activity of any of the firms causes a mandatory response from competitors. This interdependence of the actions and behavior of a few firms is a key characteristic of an oligopoly and extends to all areas of competition: price, sales volume, market share, investment and innovative activity, sales promotion strategy, after-sales services, etc.

To quantify the interdependence of firms in the market, the coefficient of volumetric, or quantitative, cross elasticity of demand is used. This coefficient shows the degree of quantitative change in the price of firm X when the volume of output of firm Y changes by 1%.

If the volume cross elasticity of demand is equal to or close to zero (as is the case under perfect competition and pure monopoly), then an individual producer can ignore the reaction of competitors to his actions. Conversely, the higher the elasticity coefficient, the closer the interdependence between firms in the market. With an oligopoly, Eq>0, however, its exact value depends on the specifics of the industry under consideration and specific market conditions.

Homogeneity or differentiation of the product.

The type of product produced by an oligopoly can be either homogeneous or diversified.

If consumers have no special preference for any brand, if all products of the industry are perfect substitutes, then the industry is called a pure or homogeneous oligopoly. The most typical examples of practically homogeneous products are cement, steel, aluminium, copper, lead, newsprint, and viscose.

If the goods have trademark and are not perfect substitutes (moreover, the difference between goods can be both real (according to technical specifications, design, workmanship, services provided), and imaginary (brand name, packaging, advertising), then the products are considered differentiated, and the industry is called a differentiated oligopoly. Examples are the markets for cars, computers, televisions, cigarettes, toothpaste, soft drinks, beer.

The degree of influence on market prices.

The firm's degree of influence on market prices, or its monopoly power high, although not to the same extent as under pure monopoly.

Market power is determined by the relative excess of the firm's market price over its marginal cost (perfect competition P = MC), or

The quantitative value of this coefficient (Lerner coefficient) for the oligopolistic market is greater than for perfect and monopolistic competition, but less than for pure monopoly, i.e. fluctuates within 0

Barriers.

Market entry for new firms is difficult but possible.

When considering this characteristic, it is necessary to distinguish between already established, slowly growing markets and young, dynamically developing markets.

Slowly growing oligopolistic markets are characterized by very high barriers. As a rule, these are industries with complex technology, large equipment, high dimensions, minimal efficient production, significant spending on sales promotion. These industries are characterized by a positive effect of scale of production, due to which the minimum average cost (min ATC) is achieved only with a very large output. In addition, entering a market dominated by well-known brands inevitably leads to high initial investment. Only large competitive firms with the necessary financial and organizational resources can afford to enter such markets.

For young emerging oligopolistic markets, new firms are likely to emerge, as demand expands quickly enough that an increase in supply does not have a downward effect on prices.

The specifics of the behavior of oligopolists in the market.

The interdependence of oligopolistic firms in the market predetermines the specific behavior of oligopolies in the market. Unlike other market structures, an oligopolistic enterprise must always take into account that its chosen prices and output directly depend on the market strategy (behavior) of its competitors, which (behavior) in turn is determined by its chosen decision. Because of this, the oligopolist:

Cannot treat the demand curve for its products as given;

Does not have a given marginal revenue curve (as well as demand, MR varies depending on the behavior of the firm itself and its competitors);

Does not have a clear point of equilibrium (just as it exists under perfect competition or under pure monopoly);

Cannot use the equation MR=MC to find the optimum point.

oligopoly market - this is a form of market organization in which several large firms operate on the market, producing a homogeneous or differentiating product, and independently setting the price for their products, taking into account the possible reaction of competitors. An oligopoly exists only when the number of firms is so small that each of them must take into account the reaction of competitors when formulating its pricing policy.

The oligopoly market is a typical form of modern market organization. An example of an oligopoly market with a homogeneous product is the market for potash fertilizers. The car market is a typical oligopoly market with a differentiated product.

The oligopoly market is characterized by the following traits :

1. there are several large firms;

2. the share of each firm in the market is significant;

3. each firm independently sets the price, taking into account the possible reaction of competitors;

4. there are obstacles to entry into the market of new firms (natural and artificial);

5. non-price competition prevails, which happens

subject (between the same goods with different quality characteristics: cars),

specific (between different products that satisfy the same need: juices, mineral water, etc.)

functional (between goods that satisfy different needs: food production and clothing production).

oligopoly market arises for the following reasons:

1. the effect of patents on scientific discoveries and inventions;

2. control over scarce resources;

3. the effect of economies of scale in production;

4. privileges from the state;

5. price and non-price competition, the use of non-economic methods of competition.

The oligopoly market is characterized by a wide variety of forms of organization. The economic literature describes various approaches to the classification of the oligopoly market. Exists oligopoly market classification on:

1) At. Fellner, which highlights:

The market is in the conditions of maximizing the profit of the industry;

Market in conditions of fundamental antagonism.

2) F. Mahlupu, which highlights:

The market is fully coordinated;

A market partly coordinated by:

a) a leading company

b) voluntary cooperation;

A market without coordination of actions, which can be represented as:

a) a price war

b) pursuing an aggressive trade policy;

c) chain oligopoly.

3)according to the degree of antagonism

Market at war;

The market is in a state of truce;

The market is at peace.

Thus, there are several possible situations in the market:

a) price wars between firms;

b) price stability in the conduct of non-price competition;

c) agreements on prices and volumes of production, official or implicit;

d) predictable behavior of firms.

7.6.2. Oligopoly market in the absence of collusion

If firms compete on price, then the oligopoly market is similar to the perfectly competitive market and is described by the corresponding models. This situation is quite rare, since large firms can compete on price for a long time due to their large financial capabilities, which can lead to large financial losses.

One of the first models of the oligopoly market is the model of the duopoly market, that is, the market in which two firms operate. It was proposed in the 40s of the nineteenth century. O. Kurno .he suggested , that there are two firms that are the same size. These firms experience constant economies of scale, that is, when the volume of production changes, the average cost, and therefore the price, does not change. Each firm decides on the volume of production independently, focusing on the free market share. As we already know, the firm achieves maximum sales revenue under the condition that the price elasticity of demand is equal to one. This state is achieved if the firm produces a volume of products that satisfies half the needs of the market. Therefore, if there is one firm on the market, then it will produce products in the amount of 50% of the market capacity, since in this case the maximum revenue is provided (Fig. 711.a). If the second firm enters this market, then it will focus on the market share not occupied by the first firm and will produce 50% of this share, i.e. 25% of the market volume (Fig.7.11.b).

a) one firm in the market b) the appearance of a second firm c) the reaction of the 1st firm d) the final equilibrium

Rice. 7.11 Cournot duopoly market

This situation cannot persist for a long time, since the first firm is not in an optimal position. She will decide to reduce the volume of production, focusing on the market share free from the second firm (75%), and the firm will set the volume of production corresponding to 50% of the free share, that is, 37.5% of the total market demand (Fig. 7.11.c) . The decrease in the production volume of the first firm creates conditions for the expansion of the production of the second firm. This adjustment process will continue until each firm produces 33.3% of the total market (Fig.7.11.d). Such a situation will characterize the establishment of a stable equilibrium in the market, as it guarantees each firm maximum revenue.

In the 30s of the twentieth century. German economist G. von Stackelberg considered a duopoly market in which one firm is larger than the other (asymmetric duopoly).

He came to the conclusion that equilibrium can be established, since in this case a large firm, being a leader, is trying to achieve a position of independence and independently sets the price, while another, smaller, firm, being an outsider, at the same time tries to reach a position of dependence, to adapt to terms of sale in that market. The smaller firm is actually a price-taking firm, acting in the same way as a firm with a perfect competitor. The adjustment process can be illustrated through reaction curves (Figure 7.12). In this case, the dominant firm chooses the most favorable point on the reaction curve, and the subordinate firm shows a Cournot-type reaction curve. G. von Shtakkelberg concluded that an asymmetric duopoly is an unstable form of market organization.

Figure 7.12 Stackelberg duopoly market

As already noted, the oligopoly market is characterized by the absence of price competition and the stability of the price level. This situation is reflected in broken demand curve models (Fig.7.13).

Figure 7.13 Broken demand curve model

According to this model, if an equilibrium price has formed in the oligopoly market, then firms are not interested in changing this price, since in any case they incur losses in the long run.

If one firm decides to increase the price, other firms are likely to leave the price unchanged. As a result, the firm that raised the price will lose a large number of buyers, since demand will be elastic, and, consequently, the firm will reduce revenue and profit. If a firm lowers the price of its product, then other firms are likely to lower the price as well. As a result of this, the expansion of sales volume will be insignificant (demand will be price inelastic), does not compensate for the losses associated with a price decrease, and, consequently, the company's revenue and profit will decrease. Thus, any deviation of the price from the equilibrium leads to a reduction in the firm's revenue and profit.

This theory also explains why firms in an oligopoly market keep prices the same even if production costs change.

In the 60s. American economists Efroimson and P. Sweezy developed a kinked demand curve model that explains the upward trend in the price level during a period of economic growth (Figure 7.14).

Fig. 7.14 Model of a broken demand curve in the context of economic growth

During the period of economic growth, the volume of production and incomes of the population increase. Therefore, the company raises the price, hoping that the growth in incomes of the population will allow selling products at higher prices. The decrease in sales will be small (inelastic demand) because buyers' incomes have increased and they can afford to buy the product at a higher price. Due to this, the company will increase the revenue from the sale of products. If a firm lowers the price of its product, other firms are likely to leave the price unchanged, believing that with increased income there will always be buyers willing to pay the same price for the product offered. As a result, the firm that reduces the price will significantly expand the volume of sales of products and income. Comparing the two options, the company's management comes to the conclusion that it is more profitable to raise prices, since no additional efforts are required to expand production.

In the oligopoly market, there are a large number of different options for the behavior of firms, and this leads to the use of simulation mathematical models that allow you to describe the behavior of competitors in the market and choose the optimal course of action. In particular, it is used game theory - a section of applied mathematics, with the help of which the optimal strategy for the behavior of a subject in conflict situations is established, which is understood as a situation of a conflict of interests of two or more parties pursuing different goals. Each of the participants in the conflict can have some influence on the course of events, but does not have the ability to fully control it.

The mathematical model should describe:

Multiple stakeholders;

Possible actions of each party;

The interests of the parties, represented by payoff functions for each player.

In game theory, it is assumed that the payoff functions and the set of strategies available to each player are well known.

Games are classified based on one principle or another.

By way of interaction they can be cooperative if firms cooperate in making decisions, or non-cooperative if firms compete with each other.

By type of win games are zero-sum, where one player's gain is equal to the other's loss, and constant-difference, where all players win or lose at the same time.

The decision of the model provides managers with a decision matrix that reflects the payoffs for all possible strategies and situations. Based on the matrix, they must make a decision. The choice of solution depends on the nature of the manager. Allocate solutions for:

Criterion maximax (optimism), i.e. the manager focuses on the maximum gain;

Criterion maximin (pessimism), i.e. the manager seeks to choose a behavior strategy that minimizes losses;

Indifference criterion (focus on the maximum average result for the best strategy).

Most often, the pessimistic option is chosen, since it is assumed that the opponent is a qualified specialist who chooses the best solutions.

Suppose we have two firms ( BUT And IN) having the same volume of sales in the market and two strategies of the firm's behavior are possible BUT: raise the price of products or leave the price unchanged (Table 7.1).

Since a competitor will take retaliatory action, one of four situations can occur in the market:

1) firm BUT raises the price, firm IN leaves the price unchanged;

2) firm BUT IN raises the price;

3) firm BUT raises the price, firm IN raises the price;

4) firm BUT leaves the price unchanged IN leaves the price unchanged.

Assume that the loss in case of a price increase by the firm BUT in our case will amount to 10,000 cu, since part of the buyers will start buying goods from the company IN which does not raise the price. If the firm IN will also increase the price, then the losses of each firm will amount to 5000 USD. The economic outcomes of each situation for firms are presented in tabular form.

Table 7.1

Decision Matrix

Firm decision BUT will depend on the chosen strategy. One such strategy is the loss minimization strategy. In this case, the company's management evaluates the possible losses for each strategy and chooses the strategy that brings the least losses. In our case, the management BUT will raise the price, assuming that the firm IN will also raise the price.

If the firms coordinated their actions (cooperative game), then the prices in the market would remain unchanged. Studies have shown that if the payoffs of the players are asymmetric, then there are inevitably elements of cooperation in the choice of strategies.

The oligopoly market, as we have already noted, is characterized by a wide variety of behaviors that, ultimately, are oriented towards obtaining maximum profit. In modern economic literature, works appear that state that large firms do not set as the goal of their behavior to maximize profits, but to achieve other results: increasing sales, maintaining market share, conquering new markets, and so on. All this complicates the analysis of the oligopoly market and expands the scope of application of simulation modeling in the practice of making managerial decisions.

Oligopoly (from other Greek oligos - few, few) - this is primarily a situation where a relatively small (ranging from 2 to 10–15) number of well-known firms dominates the market for goods (or services), satisfying the bulk of the demand of many consumers specific product(services). Each firm in an oligopoly occupies such a position in the market that almost all of its actions have a serious impact on competitors. The interdependence of the actions and behavior of oligopolists determines, in essence, the foundations for the functioning of the oligopolistic market.

It should be noted that in economic theory there is no single approach to the study of oligopoly. This is explained by the ambiguity and uncertainty of its characteristics. In particular, there may be, for example, a "hard" oligopoly, in which two or three firms dominate the entire market, and a "vague" oligopoly, in which several firms share 60–80% of the market, while many small firms serve the remaining market segment. Oligopolies can produce both standardized products (such as aluminum) and differentiated products (such as cars). Barriers to entry into the oligopolistic industry of other firms can be different in strength. Oligopolies differ in other characteristics as well.

Under these conditions, economists have tried to isolate common features behavior of oligopolists in relation to price and volume of production. As a result, it was found that: 1) prices in an oligopoly are distinguished by a certain constancy (inflexibility, "rigidity"); 2) if prices do change, then the actions of firms here are very coordinated and coordinated.

Let us consider in more detail the pricing mechanism in an oligopoly.

The behavior of an oligopoly in setting price and output is always determined by two forces acting in opposite directions. Firstly, it is the interest of firms in maximizing the total amount of profit, the achievement of which is possible with the collusion of firms, acting in this case from monopolistic positions. The model of such an oligopoly in practice coincides with the model of pure (simple) monopoly known to us. Secondly, it is a selfish interest in maximizing one's own profit, even at the expense of reducing total profit industry ("a big piece of a small pie is better than a small piece of a big one"). Therefore, collusion between oligopolists (long-term and stable) is a very difficult matter. And the following simple game model of a duopoly (two firms compete with each other) will help to understand why this is so (Table 2.7).

Table 2.7

Game model of behavior of oligopolists

As follows from Table. 2.7, each firm can set either a "high" or a "low" price for its products. If both firms set a "high" price, then each will receive an excess profit of 20 units. (upper left square). If they both set "low" prices, the profits of each will be only 15 units. (lower right square). If one firm sets a "high" price, and the other "low", then the latter will receive (by increasing its market share) 30 units. profits, and the firm that set the "high" price (by reducing its market share) - only 10 units. arrived.

Thus, in this situation, there is an incentive to collude, as well as the desire to violate the price agreement, i.e. to independent actions in the market, expressed in the establishment of a "low" price for their products. These firms face a dilemma. If they could agree on a "high" price, they would obviously go for it, especially if this agreement is documented. But even if such a possibility existed (in many countries, collusion between firms is a crime and punishable by law), can they trust each other?

If the firm BUT sets a "high" price, she runs the risk that the firm will take advantage of this IN and set a "low" price for their products. This option will be the worst from the point of view of the firm. BUT. Most likely the company BUT will set a "low" price, especially since then, for any strategy of the firm IN she will have an overall competitive advantage (30 to 10 and 15 to 15). So is the company IN will always outperform the competition by lowering the price, so firm A must understand that if it does not lower the price, it will lose its advantage. Therefore, it is most likely that both firms will set "low" prices, moving from "cooperation" to aggressive competition.

Can we conclude from this that oligopolistic firms are doomed to aggressive competition and low profits? Of course not. Over the years, the leaders of such firms are convinced that they are "sitting in the same boat", that the "price war" leads to large losses, and come to a tacit agreement to maintain high prices without trying to encroach on the market share of competitors. Nevertheless, distrust of each other is inherent from the very beginning, therefore, "military actions" between oligopolistic firms regularly begin in one form or another.

The desired stability in an oligopolistic industry is ensured by the stability and even price rigidity of the industry's products. Thus, even if costs or demand change, firms are reluctant to change prices because they fear that they might be misunderstood by competitors.

Such price rigidity is the basis of a model of oligopolistic behavior known as the "curved (broken) demand curve" model. In accordance with this model, each oligopolistic firm "faces" a demand curve for its products, curved (broken) at the point of the prevailing price R 0 (Fig. 2.29).

At prices higher R 0 the demand curve is very elastic. The reason for this is that the firm believes that if it raises the price R 0, then the rest of the firms will not follow and it will lose a significant part of its market share. On the other hand, the firm believes that if it lowers its price below P0, then other firms will be forced to follow because they do not want to lose their market share, and the firm that lowers the price will not succeed in its quest to capture more than it had. , market share.

Rice. 2.29.

Since the firm's demand curve in the considered oligopoly model is curved, its marginal revenue curve (MR) will have a gap at the value of the output Q0. If the firm's marginal cost curve (MS) passes through this gap, then certain changes in costs (within the limits corresponding to the size of this gap) will not lead to a change in the price of the firm's product: it will remain equal toР0 with output volume Q0 (another confirmation of the "rigidity" of the oligopoly price).

This does not mean that prices in an oligopoly do not change. If all oligopolists are under the same pressure from costs or demand, then a corresponding price change can be considered necessary in the interests of all oligopolistically competing firms.

How is the industry price P0 set if explicit price agreements between oligopolists are prohibited by law? So-called price leadership is a widely recognized method by which oligopolists can coordinate their price behavior without direct collusion. In this case, one firm (price leader), with the tacit consent of the others, is assigned the leading role in setting the industry price. Other firms leave their prices unchanged until the leader announces a change in their prices and usually follow him announcing the same changes.

And what price will the "price leader" of the oligopolistic industry set? The dominant firm sets a price that maximizes its own profit, and the rest of the firms produce as much as they want to produce at that price. A graphical model illustrating the behavior of the oligopoly price leader when he sets the prevailing price is shown in Fig. 2.30.

The main features of the oligopolistic market

Oligopoly is one of the most common market structures in

modern economy. In most countries, almost all branches of heavy

industries (metallurgy, chemistry, automotive, electronics, shipbuilding and aircraft building, etc.) have just such a structure.

1. Oligopoly is a market structure in which there are a small number of selling firms on the market for a product, each of which occupies a significant market share and has significant price control. However, one should not think that companies can literally be counted on the fingers. In an oligopolistic industry, as in monopolistic competition, there are often many small firms along with large ones. However, a few leading companies account for such a large part of the industry's total turnover that it is their activities that determine the course of events.

Formally, oligopolistic industries usually include those industries where several

largest firms (in different countries from 3 to 8 firms are taken as a reference point)

produce more than half of all manufactured products

The main reason for the formation of an oligopoly is economies of scale.. An industry acquires an oligopolistic structure if the large size of the firm provides significant cost savings and, therefore, if large firms in it have significant advantages over small ones.

Oligopoly is characteristic of many industries in Russia. Thus, passenger cars are produced by five enterprises (VAZ, AZLK, GAZ, UAZ, Izhmash). Dynamic steel is produced by three enterprises, 82% of tires for agricultural machines - by four, 92% of soda ash - by three, the entire production of magnetic tape is concentrated in two enterprises, motor graders - in three.

2. Products in an oligopolistic market can be either homogeneous,

standardized (copper, zinc, steel) and differentiated

(cars, household appliances). The degree of differentiation affects the nature of competition.

3. An important condition affecting the nature of individual markets is the height of the barriers that protect the industry (the amount of initial capital, the control of existing firms over new technology And latest products with the help of patents and technical secrets, etc.).

4. There are significant limitations in the availability of economic information in this market structure. Each market participant carefully protects trade secret from their competitors.

5.Special economic policy of oligopolists. if several oligopolists begin to pursue a common policy, then their joint market power will come close to that possessed by a monopoly.

Competitors may react to this in different ways. First, they can

reduce prices by less than 15%. In this case, this firm will increase the market

sales. Secondly, competitors can also reduce prices by 15%. Volume

sales will increase for all firms, but due to lower prices, profits may

decrease. Thirdly, a competitor may declare a “price war”, i.e. reduce

prices even more so. The question then becomes whether to accept his challenge.

Usually in a "price war" among themselves large companies do not enter, because

the outcome is difficult to predict.

6. Very strong oligopolistic interdependence - the need to take into account the reaction of competing firms to the actions of a large firm in the oligopolistic market.

Any model of an oligopoly must proceed from taking into account the actions of competitors. This is an additional significant limitation that must be followed

take into account when choosing a scheme of behavior for an oligopolistic firm.

Therefore, there is no standard model for determining the optimal volume of production and the price of products for an oligopoly. It can be said that determining the pricing policy of an oligopolist is not only a science, but also an art.

The oligopolistic structure can be very different, each of its

the variety leaves an imprint on the development of the pricing policy of the company.

Uncoordinated oligopoly, in which firms do not enter into any contacts with each other and do not consciously try to find a point of equilibrium that suits everyone. Duapoly.

Cartel (or collusion) of firms, not liquidating their production and

marketing independence, but providing for an agreement between them on a number of issues. First of all, cartel agreements include uniform, monopolistically high prices at which cartel members undertake to sell their goods on the market.

The cartel agreement also provides division of the sales market. This

means that each member of the cartel undertakes to sell their goods,

for example, only in certain areas.

In addition, in order to be able keep prices high, often

the supply of goods on the market is limited, and this requires limiting

production sizes. Therefore, cartel agreements often provide for the determination of the share in the production of various goods for each member of the cartel.

Collusion can be both secret and legal. In many European countries cartels are allowed, in Russia and the USA they are prohibited by law.

Let's assume that the firms - members of the cartel - decided to set a single price for their products. To do this, it is necessary to construct a marginal cost curve for the cartel as a whole. Then it is possible to determine the optimal volume of production in the cartel, which allows maximizing the total profit. (MC = MR) But the most difficult problem is

distribution of sales volume between the participants of the cartel agreement.

In an effort to maximize profits, the cartel must set quotas in such a way that the total costs are minimal. But in practice, it is rather difficult to implement such an establishment of quotas. The problem is solved by conducting complex negotiations, during which each firm seeks to

"trade" for yourself best conditions, outwit partners. In fact, markets are usually divided geographically or according to the prevailing volume of sales.

The creation of cartels runs into serious obstacles. It's not only

antitrust laws. Agreements are often difficult to reach

due to the large number of firms, a significant difference in the nomenclature

products, cost levels. Usually a cartel member is tempted to

break the agreement and get a big profit.

By virtue of a legal ban, cartels in modern Russia does not exist. However, the practice of one-time price collusion is very widespread. It suffices to recall how periodically there is a shortage of either butter or sunflower oil, or gasoline on the consumer market.

Cartel-like market structure(or "play by the rules"), in which

firms deliberately make their behavior understandable and predictable for

competitors, thereby facilitating the achievement of equilibrium in the industry or a state close to it.

Firms do not enter into agreements with each other, but subordinate their behavior

certain unwritten rules. Such a policy, on the one hand, makes it possible to avoid legal liability arising from anti-cartel legislation. And on the other hand, to reduce the risk of unpredictable reactions of competitors, i.е. protect yourself from the main danger inherent in an uncoordinated oligopoly. "Playing by the rules" facilitates the achievement of oligopolistic equilibrium.

The most commonly used technique of "playing by the rules" is price leadership. It consists in the fact that all large price changes are first carried out by one firm (usually the largest), and then they are repeated in similar sizes by other companies. The price leader actually single-handedly determines prices (and hence the volume of production) for the entire industry. But he does it in such a way that the new prices suit the rest.

Characterized by the action of several sellers in the market, and the emergence of new ones is difficult or impossible.

If there are two producers in the market, then this type of market is called duopoly which is a special case of oligopoly, which is more common in theoretical models than in real life.

Oligopolistic markets have the following features:

• a small number of firms and a large number of buyers. This means that the volume market supply is in the hands of a few large firms that sell the product to many small buyers;
• differentiated or standardized products. In theory, it is more convenient to consider a homogeneous oligopoly, but if the industry produces differentiated products and there are many substitutes, then this set of substitutes can be analyzed as a homogeneous aggregated product;
• the presence of significant barriers to entry into the market, i.e. high barriers to market entry;
• firms in the industry are aware of their interdependence, so price controls are limited.

Examples of oligopolies include manufacturers of passenger aircraft such as Boeing or Airbus, car manufacturers, household appliances etc.

Another definition of an oligopolistic market would be a Herfindahl index value greater than 2000.

Price policy oligopolistic company plays a huge role in her life. As a rule, it is not profitable for a firm to increase the prices of its goods and services, since it is likely that other firms will not follow the first one, and consumers will "pass" to a rival company. If the company lowers prices for its products, then in order not to lose customers, competitors usually follow the company that lowered prices, also reducing prices for the goods they offer: there is a “race for the leader”. Thus, so-called price wars often occur between oligopolists, in which firms set a price for their products that is not higher than that of a leading competitor. Price wars are often detrimental to companies, especially those that compete with more powerful and larger firms.

There are four models of price behavior of oligopolists:

1. broken demand curve;
2. collusion;
3. leadership in prices;
4. cost-plus pricing principle

Broken demand curve model was proposed by the American economist P. Sweezy in the 40s. XX century, which analyzes the reaction of an oligopolist to a change in the behavior of their competitor. There are two types of reaction of market participants to price changes by an oligopolistic firm. In the first case, when a firm raises or lowers prices, competitors can ignore its actions and maintain the same price level. In the second case, competitors can follow the oligopolistic firm, changing prices in the same direction.

conspiracy (cartel) when firms come to an agreement among themselves regarding prices, production volumes, sales.

Price Leadership- a model in which oligopolists coordinate their behavior by tacitly agreeing to follow the leader.

Cost-plus pricing- a model associated with the planning of output and profits, in which the price of products is set according to the principle: average costs plus profit, calculated as a percentage of the level of average costs.