Differences Between Monopoly And Oligopoly

Differences Between Monopoly & Oligopoly

Outline:

A monopoly is a seller of a good which has no close substitutes and has a considerable control over price and protection from the competition.

An Oligopoly practitioner is a searcher of price which should consider the reaction of the competitors.

Price search companies such as monopolies and oligopolies face downward sloping demand

Curve. Faced with a perfectly competitive firm’s demand curve is horizontal, because they are

Price takers.

Monopoly Vs Oligopoly:

MONOPOLY:

It is a situation in which a single company or a collection owns all or nearly all of the market for a given type of product or service. Monopoly is characterized by an absence of competition, which can result in high inferior

Whereas,

Oligopoly is mainly of following types :

1) Pure or Prefect oligopoly

2) Imperfect or differentiated Oligopoly

3) Collusive Oligopoly

4) Non-Collusive Oligopoly

1) Pure or Prefect oligopoly

If the firms produce harmonized products, then it is called pure or perfect oligopoly. Though, it is rare to find pure oligopoly situation, yet, cement, steel, aluminum and chemicals producing industries approach pure oligopoly.

2) Imperfect or differentiated Oligopoly

If the firms produce differentiated products, then it is called differentiated or imperfect oligopoly. For example, passenger cars, cigarettes or soft drinks.

The goods produced by different firms have their own distinguishing characteristics, yet all of them are close substitutes of each other.

3) Collusive Oligopoly

If the firms cooperate with each other in determining price or output or both, it is called collusive oligopoly or cooperative oligopoly.

4) Non-Collusive Oligopoly

If firms in an oligopoly market compete with each other, it is called a non-collusive or non-cooperative oligopoly.

 A Monopolist’s Demand Curve