What is a fundamental aspect of an oligopoly?

In an oligopoly, a fundamental aspect is that a few firms hold a significant amount of market power. This is characteristic of oligopolistic markets, where the actions of one firm can directly impact the others. Because there are only a limited number of firms, each has enough influence to affect market prices and output levels. This interdependence among the firms often leads to strategic behavior, where companies consider the potential reactions of their competitors when making decisions about pricing and production.

Oligopolies can also engage in price-setting behavior, but this doesn't mean that all firms are required to charge the same price or that there's a sole producer. While firms in an oligopoly may sell similar products, there can indeed be substitutes available. The price-setting in oligopolistic markets is typically complex, bounded by competition among the few players rather than regulated by a single entity. Understanding this dynamic is critical for recognizing how firms operate within such market structures and the implications for consumers and competition.