Question

Why is interdependence the key characteristic of oligopoly?

Answer 1

Meaning of Oligopoly: Oligopoly also means competition among the few, which also means that there are few firms or sellers in the market producing or selling a product.

There are many characteristics of Oligopoly Interdependence being one of them. Interdependence occurs since there are very few firms available in the industry as a whole, which affects the decision making of all the firms. Any changes in the price, output or the product type will have a direct impact on the rivals, who would then react to make the necessary changes.

Thus Oligopolistic Firms must not only consider the demands but its very important they also take into account the reactions and changes their decisions would have on the other firms. They would therefore need to take into consideration all these factors before changing the pricing, output, etc.