Oligopoly refers to a market situation with few sellers i.e. more than two sellers. Under oligopoly, industry is dominated by a few firms who are producing an identical or close substitute may emerge in an industry when:

a)      Economics of scale or advantages of large-scale production exists- as a result, a few firms are able to supply all or much of the total industry output.

b)      Superior entrepreneurs reduce the large number of firms into a few through mergers and holding companies.

c)      The exclusive ownership of patents and other rights by a few firms or exploitation of the advantages of product differentiation creates oligopoly market.

d)      The controlling power of a few firms over the available natural resources reduces competition only to a few firms.

e)      The need for heavy investment of capital in some industries prevent the entry of a large number of firms.

Features of Oligopoly- First, every firm under digopoly has to be conscious of the reactions of its rivals. As the number of competitions is few, any change in price in price, output, product etc by one firm will have a direct effect on the others who naturally relatively by changing their own prices, output, products etc.

Secondly, the oligopoly is characterized by indeterminateness. A firm does not know for certain whether its decisions regarding price and output will affect its competitors favourabely or adversely. Further, does not know whether competitors will approve or disapprove of its decision and in what way their rechons will be known. Thirdly, digoploly  firms may show confliching attitudes to one another. On the one side, they may appear to realise the disadvantages of competition and rivalary and may work out some policy of collusion or they may continuously maximing its  share of profits.

Fourthly, digopoly fimrs resort to various aggressive marketing methods to increase their share of the market or adopt defrnsive marketing methods to prevent a decline in their share of the market.  They resort to extensive advertisement and sales promotion between them.

Finally, in digopoly seller has some monopoly power over the product it produces (brand name, patent etc) but it does not acquier monopoly control of the market.

There are various digopoly models:

1)                  Price leadership Model

2)                  Collusive model: The Cartel Arrangement.

3)                  Sweezy’s kinked demand cure Model.

4)                  Pricing under duopoly.