ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -An oligopoly is when a few companies exert significant control over a given market. Together, these companies may control prices by colluding with each other, ultimately providing uncompetitive prices in the market.

Detailed explanation-2: -However, in the absence of government intervention and regulations, the players in an oligopoly market may collude. This implies that they together may determine and set prices and control them like in a monopoly. Example of oligopoly: The Indian airline industry is an example of classic oligopoly market structure.

Detailed explanation-3: -In an oligopoly, all firms would need to collude in order to raise prices and realize a higher economic profit. Most oligopolies exist in industries where goods are relatively undifferentiated and broadly provide the same benefit to consumers.

Detailed explanation-4: -Collusion in an oligopoly can hugely benefit firms, which can have beneficial consequences for society. For instance, collusion between coffee growers allows small firms to push for fairer prices against more dominant monopsonistic corporations such as Starbucks.

Detailed explanation-5: -Price collusion might occur in oligopolistic industries in order to maximize profits and for firms to better compete. For example, in the tobacco industry the competing firms might collude with each other to set quantities and prices instead of engaging in regular competition or price wars.