What is an Oligopoly?

An oligopoly is a market in which a small number of suppliers comprise the bulk of the available supply. Since there are so few suppliers, they can control prices to some extent, allowing them to generate unusually high profits. This situation arises when there are strong barriers to entry, such as government regulation or a large capital expenditure requirement.

Examples of an Oligopoly

An example of an oligopoly is the airline industry, for which the main restriction on entry to the market is a limited number of gates at airports. Another oligopoly is the automotive industry, which requires new entrants to make massive investments in production facilities. Yet another example is wireless carriers, since there is only a limited amount of bandwidth available for carrying cell phone signals, and the rights to all available bandwidth have already been taken. A fourth example is the auditing industry, where the four largest firms have such an expansive network of offices that they have essentially locked up all major multi-national clients.