Difference between monopoly and oligopoly

The difference between monopoly and oligopoly is found in the number of members that constitute them .

A monopoly, strictly speaking ( see pure monopoly ) is a situation in which there is only one seller in the market. While an oligopoly is made up of few or a small number of companies that have market dominance.

In the competitive situation of monopolies and oligopolies there are more similarities than differences, because in both forms there are a number of barriers that can be natural, technological, legal or even coercive. This prevents sufficient competitors and that the best price and best quality benefits for the consumer are found.

Both structures tend to benefit from the economy of scale and, consequently, obtain profits from producing with lower costs than their hypothetical competitors.

Difference between monopoly and oligopoly

We can compare the two market structures with the following table:

Characteristic Monopoly Oligopoly
Producer Only Small group
Prices Can influence them It can influence them
(less than the monopoly)
Entry barriers Very big Not so big
kind of product Homogeneous Homogeneous or differentiated

Competition in monopoly and oligopoly

The main difference between monopoly and oligopoly, as we have already said, is the number of members who have the power of the market . And, more specifically, the competition that exists between producers or sellers. So in an oligopoly, although they could operate by agreeing (which would be similar to a monopoly), there are possibilities of competition.

Therefore, a minimum level of competition can be given in the oligopoly, depending on whether it is a concentrated or differentiated oligopoly.

  • Concentrated oligopoly

In this type of oligopoly, the few existing companies in the market could be producing the same product and compete looking to gain market offering a better price.

In the concentrated oligopoly, the best product price is competed.

  • Differentiated Oligopoly

In this case, companies may offer the same product, but this could be differentiated by the added quality or added value that stimulates the consumer to prefer the best product.

The differentiated oligopoly competes for quality and added value of the product.

For its part in the monopoly we can find types such as pure , natural or artificial.

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