Oligopoly:-

Oligopoly is a form of market organization in which there are few cellars of a homogenous or differentiated product if there are only two sellers, we have a duopoly if the product is homogenous, we have a pure oligopoly, if the product is differentiated, we have a differentiated oligopoly.

So we can define oligopoly as that
“oligopoly is the form of market organization in which there are few sellers of a homogeneous or differentiated product”.

Oligopoly is the most prevalent form of market organization in the manufacturing sector of most nations some oligopolistic industries in India are automobiles, primary aluminum, steel, electrical equipment, glass, breakfast cereals, cigarettes some of these production like steel and aluminum are homogeneous, while others such as automobiles, soaps and detergents are differentiated. Oligopoly exists also when transportation corts limit the market area. For example, even though there are many cement producers in India, competition in limited to the few local producers in a particular area.

Sources of oligopoly:

The sources of oligopoly are generally the same as for monopoly. That is

(1) Economics of scale may operate over a sufficiently large range of outputs as to leave only a few firms supplying the entire market.
(2) Huge capital investments and specialized inputs are usually required to enter an oligopolistic industry like automobiles, aluminum, steel, and similar industries and this acts as an important natural barrier to entry.
(3) A few firms may own a patent for the exclusive right to produce a commodity or etc to use a particular process.
(4) Established firms may have a loyal following of customers based on product quality and service that new firms would find very difficult to match.
(5) A few firms may own or control the entire supply of a row material required in the production of the product and
(6) The Government may give a franchise to only a few firms to operate in the market.

The above are not only the sources of oligopoly but also represent the barriers to another firms entering the market in the long run.