An oligopoly is a market situation in which a small number of firms dominate an industry.
Because each major firm’s decisions affect the others, oligopoly is characterized by strategic interdependence. A company may consider rivals’ likely reactions before changing prices, output, advertising, or product features. This makes outcomes more complex than in a market with many small sellers.
Oligopolies can produce standardized goods, such as some commodities, or differentiated products, such as automobiles and airlines. Entry barriers may include large capital requirements, strong brands, control of distribution, patents, or network effects.
An oligopoly is not the same as a monopoly, which has one dominant seller. It is also different from a monopsony, in which one major buyer has market power. Firms in an oligopoly may compete intensely, coordinate informally, or form illegal cartels; the legal treatment depends on the conduct and the jurisdiction.