In economics, an oligopoly is a market structure with a small number of firms whose decisions strongly affect one another.
Because only a few significant sellers operate in the market, each firm must consider rivals’ likely responses when setting prices, choosing output, advertising, or introducing products. This strategic interdependence distinguishes oligopoly from perfect competition, where individual firms are too small to influence the market price.
Oligopolies may compete aggressively, but firms may also coordinate explicitly or implicitly. Competition authorities often examine mergers, collusion, and conduct that could reduce competition. Outcomes vary: some oligopolies have differentiated brands, while others sell nearly identical commodities.
The term is not defined by one exact numerical cutoff for the number of firms. A market can be economically oligopolistic when a few firms control a large share of sales, even if many smaller businesses exist. Barriers to entry are often important in sustaining the structure.