Discuss any five features of a firm under oligopoly

1. High costs of entry and exit

The railway, airline, and space explorations are so difficult to enter that they support oligopolies. Pooling the capital is extremely cumbersome; the legal hurdles are quite an incredible milestone; leaving the industry can cause national inconveniences and attract hefty fines and lawsuits.

2. Few large firms dominating the industry

In an oligopoly, the market is dominated by a few firms. For instance, in Australia, the supermarket sector is dominated by two firms, that is, Coles and Woolworths. The market share of these two firms is over 60%.

3. Can earn an economic profit in the long run

While perfectly competitive firms make zero economic profits in the long run, an oligopoly can earn positive economic profits in the long run because of barriers to market entry.

4. Interdependence and Group behavior

All oligopolies are highly dependent on each other. One could lead others into economic losses by unreasonably lowering prices to gain competitive advantages. It happened when the United States deregulated the airline industry. These firms must always match the marketing force of competitors or risk getting dominated and overrun. Competition among oligopolies causes group behavior among them as they try mirroring each other.

5. Prevalent advertising that is often at a national amplitude

Oligopolies are few enough to stipulate prices. In such cases, brand differentiation is key to the justification of pricing differences. Even when prices are similar across the market due to mirroring, oligopolies strive in marketing, sustaining aggressive advertising across the entire market. Superior marketing skills that resonate well with consumers and outstanding product differentiation excel.

In other cases, oligopolies could target different market segments within which they enjoy monopolistic benefits. For example, some companies produce expensive, high-quality cameras for elite professionals, while some manufacturers focus on harnessing low-income consumers.