Economics

Oligopoly basically means a market that is directed by a small number of independent suppliers, which enables them to jointly exercise control over market prices, supply, and other market factors (Business Dictionary, 2009). These players provide predominantly comparable products that are mainly separated by promotional expenditure and heavy advertising. Because of their limited number, suppliers indispensably anticipate the impact of each others marketing strategies in order not to lose their market shares. Some of the good examples of oligopolies include petroleum, banking, automotive, and airline markets. In these markets, only a few big businesses dominate the market, thus making competition exceptionally complex for the new players in the industry. Accordingly, the participants in oligopoly markets can effectively create a sellers market.
I. Oligopolies Help Consumers
    In some cases, oligopolies benefit consumers in view of the fact that the product produced by this select group of independent suppliers are generally almost the same and, as a result, these suppliers, which are contending for market position, are mutually dependent with each other (Investopedia, 2009). Therefore, unlike monopolies, oligopolies sometimes trigger price wars between the suppliers. To illustrate, if a particular economy requires no more than 200 cars, and Company A produces 100 cars and a competitor, Company B, produces the other 100, then the price of cars of the two companies will likely be interdependent and, as such, will be somewhat similar. As a result, if Company A starts to sell its cars at a lower price, then it will expectedly get a greater market share thus, such situation will force Company B to likewise lower its car prices in order to maintain its market share. In this case, the consumers will benefit the most out of the price war seeing that low priced products are made available to them.
II. Oligopolies Help Income Distribution
    In an oligopoly market, only a few numbers of large independent suppliers compete among themselves. This handful of participants accounts for a moderately large market share. Oligopolies, therefore, help income distribution in view of the fact that selection of products is comparably limited, or the products and design offered by this type of market comes from an extremely limited group. In addition, independent suppliers of an oligopoly market indispensably take into consideration the reactions of their competitors to any change in output, product price, or types of non-price competition. Accordingly, because of this interdependency, the services and products of the independent suppliers are generally identical, which will likely result to equal market share and equal distribution of income. Moreover, it may also be possible that in order for the income to be somewhat equally distributed, the few suppliers may decide to undertake cartels or price fixing agreements. In view of the agreement, players can perform as if the market is nothing short of monopoly, capitalize on joint profits, and prevent revenue and price instability in the industry.