In yesterday’s post<\/a> I talked about firms in monopolistic competition – the situation characterized by<\/p>\n Oligopoly is rather the opposite case, characterized by<\/p>\n An example of oligopoly might be the computer chip industry.<\/p>\n In the case of monopolistic competition, a given firm holds its market share due to some distinction it offers. Perhaps it’s the firm’s location, or the personalities of its staff. That distinction gives the firm an effective monopoly with clientele that prefer it; hence, monopolistic competition.<\/p>\n In the case of oligopoly, each firm typically enjoys a technological advantage that enables it to compete. For example, for anti-virus software, some people prefer Bitdefender, while others prefer McAfee. A firm’s technological advantage needn’t only be scientific; it can be management as well. Hence a given customer’s preference towards a particular airline or grocery chain.<\/p>\n In a coming post I’ll be looking at the profitability challenge faced by large firms.<\/p>\n Source:<\/p>\n Parkins, Michael and Robin Bade. Economics: Canada in the Global Environment<\/u>, 2nd ed. Don Mills: Addison-Wesley, 1994.<\/p>\n\n
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