What characterizes an oligopoly?

An oligopoly is characterized by a market structure in which a few sellers dominate and exert significant control over the market. This concentration of sellers leads to situations where each firm must consider the potential reactions of rivals when making decisions about prices, output, and other business strategies. This interdependence among firms is a hallmark of oligopolistic markets, resulting in unique pricing strategies, including collusion or price leadership.

The key distinction here is that the presence of only a few firms enables them to influence market conditions significantly, contrary to markets with many sellers where competition typically drives prices down. This control can lead to higher prices and reduced output, differentiating oligopoly from more competitive market structures.