Difference Between Oligopoly and Monopoly

Edited by Diffzy | Updated on: September 24, 2022

       

Difference Between Oligopoly and Monopoly Difference Between Oligopoly and Monopoly

Why read @ Diffzy

Our articles are well-researched

We make unbiased comparisons

Our content is free to access

We are a one-stop platform for finding differences and comparisons

We compare similar terms in both tabular forms as well as in points


Introduction

In a market, there are many different types of imperfect market competition that might exist for a variety of services and goods. A few examples are the concepts of oligopoly and monopsony. On the one hand, monopoly may be seen for goods and services that will not face any kind of competition, while on the other, oligopoly can be noticed for products and services that will face more intense rivalry.

An economic market may be divided into many types, such as an oligopoly or a monopoly, depending on its structure. An oligopoly is a sort of competition between a small number of vendors, while a monopoly is a situation in which one seller has complete control over the market. Although oligopolies and monopolies are similar in many ways, there are significant variations between them in terms of market behavior and competition.

Oligopoly vs Monopoly

The main difference between an oligopoly and a monopoly is that in an oligopoly, a large number of enterprises exert influence over the market's dynamics. In contrast, in a monopolistic market, there is only one business that constitutes the whole market, resulting in significant differences in the dynamics of the market between the two market types.

The term oligopoly refers to a kind of market structure in which a single vendor or a small group of sellers control a market or an industry. Oligopoly is an economic word that refers to a situation in which a small number of people govern a large number of people. Depending on the size of the market, it might be national or even regional. The airline, automotive, banking, and telecommunications sectors are among the most often cited instances of oligopoly in the marketplace. Oligopoly is described as a market structure in which a small number of vendors (usually more than one, but not necessarily fewer than 10) offer items from the same category with little distinction. The only thing that distinguishes the products is how they are made or how they are packaged. This form of the market has high rivalry among the participants, and customers have the option of selecting the same alternative of the product from among the several options offered on the market.

When a corporation has complete control over a market, this is referred to be a monopoly. When a single person or institution has complete control over all of the business in an industry, this is referred to as a monopoly. Because the business or product in question is the only one that is extensively disseminated in the market, customers may feel they have no option but to patronize the company or product in question. Monopolies exist in markets when a single vendor of products or services is the only pricing determinant in the market, as opposed to competitive markets. In such a market, the seller is the exclusive supplier of products or services, according to the seller. The seller can affect the price of the items, and there are a large number of buyers who are in desperate need of that particular commodity.

Difference Between Oligopoly and Monopoly in Tabular Form

Table: Oligopoly vs Monopoly
Parameters of Comparison
Oligopoly
 Monopoly
No of Competitors
 An oligopolistic market is characterized by the presence of numerous competing firms that offer the same product.
 A monopolistic corporation is one in which there is only one company that sells a certain product.
Competition
There is fierce rivalry amongst the firms who offer the same goods in this market.
Monopolistic businesses do not have to compete since they are the only producers in the market.
Prices of goods
When compared to monopolies, the prices of items under an oligopoly are usually always cheaper or more equitable than those in monopolies.
Because of a lack of competition, monopolies lead to an increase in the price of commodities.
Influence on market
Every competitive firm has an impact on the market.
The corporation has a one-to-one impact on the market's pricing and also establishes brand identity.
Example
Tanker companies, health insurance, cosmetics, automobiles, and other businesses are examples of this.
Companies in the technology sector, such as Microsoft, Google, and others.

What is Oligopoly?

An oligopoly is a market structure in which a small number of big companies control the majority of the market. We needed a happy medium that was somewhere between having a store on every corner and not having a single brand that controlled the entire market. If you think about monopolies, where one entity controls the entire market, and perfect competition, where many smaller companies are selling the same goods and services, we needed to find a happy medium. As a result, oligopolies were established.

An Oligopoly Market is a system of Markets in which there is more than one Vendor (or company) for the trading of a specific item, but there are only a small number of Vendors in general. The choice of one Vendor has an effect on the decision of others in the Market, indicating imperfect competition even though the competition is quite restricted. The interdependence of the Vendors is one of the most distinguishing aspects of this form of Market, which encourages them to cooperate and compete with one another to dominate the Market by altering demand and supply depending on pricing.

Companies often cooperate rather than compete with one another to establish a precise price or production because of the many economic advantages that oligopolies enable them to achieve. Firms operating in oligopolies have complete control over pricing, making it more difficult for new enterprises to join the market. In this approach, they may avoid the creation of new rivals who might impede the expansion of their firm. New firms, on the other hand, can charge cheaper prices, putting the long-term viability of the earnings of cooperating enterprises in jeopardy.

Oligopolies may be found in a variety of industries, including steel producers, oil firms, railways, airlines, and medicines. Companies opt to collaborate rather than compete under this market structure, allowing them to reap the rewards of their efforts. They either establish pricing jointly or designate a leader who will raise prices first, with the rest of the companies following suit.

Oligopoly may be divided into two types: finite and infinite. When new businesses enter an industry, they find it difficult to compete, either owing to regulations or expensive start-up costs or because the sector is already controlled by a limited number of firms, the industry is said to be a finite oligopoly. New businesses may readily join an industry with an endless oligopoly, which is one in which new firms can enter easily.

What is Monopoly?

A monopoly is a market in which there is only one vendor (known as the monopolist), yet there are numerous customers. In a completely competitive market, which consists of a large number of both sellers and buyers, no one buyer or seller can affect the price of a product in any significant way. Instead of having complete control over the price of a product like sellers in a completely competitive market, a monopolist has considerable power over the price of a commodity like oil.

Because of the monopolist's inability to compete effectively, the amount sold by him is often less than the quantity that would be sold in a perfectly competitive business, and his price is typically higher than the price that would be paid by a perfectly competitive firm. A competitive corporation is referred to as a "price taker," while a monopolist is referred to as a "price creator." A monopsony is a market in which there are numerous sellers but only one buyer, which is similar to a monopoly.

A monopolist can increase the price of a product without having to worry about the activities of rivals. Generally speaking, if a company increases the price of its goods in a completely competitive market, it will lose market share as purchasers shift their business to other vendors. Understanding this basic statement is essential to comprehend the notion of monopoly: The monopolist is the market maker, and he or she controls the quantity of a commodity or product accessible in the market for sale.

In practice, however, a profit-maximizing monopolist cannot just charge whatever price it desires. Consider the following illustration: Company ABC has a stranglehold on the market for hardwood tables, allowing it to set whatever price it wishes for its products. Firm ABC, on the other hand, recognizes that if it charges $10,000 per hardwood table, no one will purchase any, and the company would be forced to close its doors. Since buyers would swap alternative commodities, such as iron or plastic tables, for hardwood tables, this has occurred.

As a result, Company ABC will charge a price that allows it to generate the greatest amount of profit feasible. Before doing so, the monopolist must ascertain the features of market demand.

Main Differences Between Oligopoly and Monopoly In Points

  • Monopolies exist in situations when a single business provides commodities that are not easily substituted, while oligopolies exist in situations where a small number of reasonably big enterprises create items that are comparable but somewhat different from one another.
  • An oligopoly market is one in which there are a limited number of options and numerous sellers, while a monopoly market is one in which there is only one seller.
  • In contrast to oligopolies, monopolies, such as those seen in marketplaces controlled by a single vendor, are often simpler for governments to regulate and regulate effectively.
  • Oligopolies are more prevalent than monopolies, and they have a greater influence on consumers as a result of this.
  • Because a few tiny enterprises may not be able to dominate such a big market, an oligopoly may be dismantled in the long run. Because the market is currently controlled by a single major corporation, a monopoly cannot be broken up.
  • An oligopoly is represented by health insurance companies, while a monopoly is represented by Microsoft industries, which are involved in the development of operating systems.
  • The geographical extent of a market might influence the kind of structure that exists. One firm may be able to monopolize an industry in a certain location when there are no other options, although a few comparable companies operate elsewhere in the nation. An example of this would be a corporation that operates as a monopoly in one location but as an oligopoly in a bigger geographical area.
  • The firms selling the same product in an oligopoly are subjected to intense competition; but, since they are the only producers in the market, monopolistic enterprises are not subjected to competition.

Conclusion

Market structures such as oligopoly and monopoly are two distinct kinds of market systems. Both are marketplaces in which a few enterprises dominate and control a large proportion of the total market share and revenue. It is the rules of supply and demand that govern the operation of both of them.

Gas and electric utilities are also given monopolies in their respective markets. State public utility commissioners, on the other hand, are significantly involved in the regulation of these utilities. Rates are often limited, as are any rate increases that may be passed on to customers by the corporation.

Oligopolies may be found in every sector of the corporate world. The market for mass media and entertainment is controlled by a small number of corporations. The Walt Disney Company (DIS), ViacomCBS (VIAC), and Comcast (CMCSA) are among the most well-known names (CMCSA). Universal Music Group and Warner Music Group have a firm hold on the music industry and command a high share of the market.

One important distinction between oligopoly and monopoly is that in oligopoly, there are a limited number of big enterprises. In a monopoly, there are many small firms. These corporations wield significant power and maintain tight control over the market. There is only one business in monopoly markets, and those that do exist as the only suppliers of the product in the market often have no competition.

References


Category


Cite this article

Use the citation below to add this article to your bibliography:


Styles:

×

MLA Style Citation


"Difference Between Oligopoly and Monopoly." Diffzy.com, 2022. Sun. 27 Nov. 2022. <https://www.diffzy.com/article/difference-between-oligopoly-and-monopoly-361>.



Edited by
Diffzy


Share this article