What is meant by interdependence in an oligopoly?

Interdependence means each firm must consider how its rivals will respond before acting, because with so few firms any move by one directly affects the others.

Give four forms of non-price competition used in an oligopoly.

Firms compete through advertising and branding, loyalty schemes, product features and quality, and customer service.

Give three examples of markets that are oligopolies.

Supermarkets, mobile phone networks and petrol retailing are all oligopolies.

WJEC A-Level Business 601-5238-2

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Markets and Market Research

Oligopoly and monopoly

3 things to know
AS Unit 1

Overview

Main features of an oligopoly, interdependence in an oligopoly and price war.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

Why are prices often stable in an oligopoly?

Key term

What is an oligopoly?

Key term

Name the main features of an oligopoly.

Questions from this subtopic

Each one with the model answer underneath.

1
What is an oligopoly?
Model answer
An oligopoly is a market dominated by a small number of large firms, each holding a substantial share of total sales.
2
Name the main features of an oligopoly.
Model answer
A few firms hold most of the market, barriers to entry are high, products are differentiated by branding, and each firm's decisions depend on how it expects its rivals to react.
3
What is meant by interdependence in an oligopoly?
Model answer
Interdependence means each firm must consider how its rivals will respond before acting, because with so few firms any move by one directly affects the others.
4
Why are prices often stable in an oligopoly?
Model answer
A price cut is quickly matched, so nobody gains market share and everybody loses margin, while a price rise not matched by rivals loses sales, so firms leave prices where they are.
5
Give four forms of non-price competition used in an oligopoly.
Model answer
Firms compete through advertising and branding, loyalty schemes, product features and quality, and customer service.
6
Give three examples of markets that are oligopolies.
Model answer
Supermarkets, mobile phone networks and petrol retailing are all oligopolies.

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