![]() ![]() ![]() For example, if one business sets its prices at a lower rate, the other firms may do the same to maintain their position in the market. Individual firms might break away from their agreements and change their prices to increase their share of the market. In this market structure, the actions of one firm often have a significant influence on the operations of the rest. It serves as an alternative to setting prices based on market value. This arrangement allows businesses to avoid competing with one another to set the prices for their products. They can then set higher prices for their products because of this heightened need. Companies might collaborate to restrict the supply of their goods or services, which can increase demand. Related: Types of Market Demand What is an oligopoly?Īn oligopoly is a market structure where only a few firms within the same industry work together to control supply and demand. In this article, we define oligopolies, explain why businesses enter them and list some common examples. This market structure can allow firms to keep prices high by agreeing to restrict the supply of their goods or service. Oligopolies often disrupt the natural price changes that respond to supply and demand. An oligopoly forms when a small number of companies share the market, resulting in a limited state of competition. ![]()
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