oligopoly

oligopoly, market situation in which each of a few producers affects but does not control the market. Each producer must consider the effect of a price change on the actions of the other producers. A cut in price by one may lead to an equal reduction by the others, with the result that each firm will retain approximately the same share of the market as before but at a lower profit margin. Competition in oligopolistic industries tends, therefore, to manifest itself in nonprice forms such as advertising and product differentiation. Characteristic oligopolies in the U.S. are the steel, aluminum, and automobile industries.