Characteristics of an oligopoly?
- A market dominated by few large firms (concentrated market)
- Make abnormal profit
- Firms are said to be interdependent
- High barriers to entry
- Use non- price competition factors
- Firms engage in price wars when there is a new entrant to the market
Explaination of the Kinked demand curve:
Firms operating in an oligopolistic market are said to be interdependent (one action of one firm will impact on another). This creates uncertainty and so they dont compete on price but through non - competitive factors - so prices are generally stable. Changes to price in the market can lead to a loss of market share and therefore profit.