Updated November 27, 2023
Difference Between Oligopoly vs Monopoly
In a market, one can find various forms of imperfect market competition for several services and products. Oligopoly vs Monopoly are 2 of them, wherein monopoly can be a view for those products and services without any competition. At the same time, on the flip side, oligopoly can be observed for the products and services with stiffer competition.
Monopoly: Services offered for Transport, Water, Electricity, and so on are practical examples of the monopoly. A monopoly is a market condition wherein only a single seller sells an entire product, which is 3.
Oligopoly: Industries like an automobile, cold drinks, telecommunication, etc., can be some industries where an Oligopoly type of competition can be found. An oligopoly is a kind of market competition whereby few sellers or vendors in the marketplace sell differential or nearly differential products. In an oligopoly, as stated, only a few firms or sellers are operating in the marketplace. So the sellers or the firms are influenced by the activities of other firms or the sellers.
Head To Head Comparison Between Oligopoly vs Monopoly (Infographics)
Below is the top 9 difference between Oligopoly vs Monopoly:
Key Differences Between Oligopoly vs Monopoly
Both Oligopoly vs Monopoly are popular choices in the market; let us discuss some of the major differences :
- The major difference between Monopoly vs Oligopoly market is Monopoly refers to a kind of market that has one seller who is dominating the entire market, and on the other side, the economic structure wherein there are a handful or few firms or sellers in the marketplace who are selling similar or same kind of products and who are competing among themselves is an Oligopoly.
- In a monopoly, there is only a single player in the whole marketplace, but in an oligopoly, the players range from two to ten.
- In a monopoly kind of competition, the seller will dominate the entire market by selling a unique or, say, a specialty product for which there will be no substitute available. On the contrary, in an oligopoly, the service offered or the product the firm sells are either the same or different and have closed or nearby substitutes.
- The reasons for restricting the barriers to entry in the monopoly market can be economic, legal, or institutional, but the major reason for the barrier to entry in an oligopoly kind of competition is economies of scale.
- In a monopoly, price discrimination does exist. Customers or consumers must pay a different price for the same or similar product. In contrast to the oligopoly, the price will remain fixed longer.
- In an oligopoly, the firms or the sellers set their product price based on the price of the similar or the same product which is offered by the rival firm or the seller in the marketplace, which is just the flip side in the case of a monopoly type of competition, as there are no rivals.
Oligopoly vs Monopoly Comparison Table
Below is the 9 topmost comparison between Oligopoly vs Monopoly
|Basis of Comparison||Oligopoly||Monopoly|
|Basic Definition||An oligopoly is a kind of marketplace that has small or few numbers of relatively large sellers or firms that will produce almost the same and slightly different products. In this kind of market, there will also be significant barriers to entry for other firms or enterprises.||A monopoly is a marketplace containing one firm that will produce goods with no close substitute and with significant barriers to entry of other sellers or firms.|
|Number of firms||The count could go from 2 to 10 firms.||There is only a single firm.|
|Competition||There is little competition here between the firms.||There is no competition|
|Product Type||There is no such fixed bound for a product, but depending upon the number, there could be no differentiation or substantial differentiation.||A monopoly sells a unique and extremely different product|
|Price determination||Competition or the firm’s direction decides the price of the product.||Consumers’ demand will determine the price of the product.|
|Entry barriers||Comparatively less than Monopoly, but an entry barrier does exist.||The entry barrier is relatively very high here.|
|Product Pricing||Unlike Monopoly, prices are fairly charged.||Consumers are charged a very high price.|
|Pricing controls||Where the marginal revenue equals the marginal cost would be optimal pricing for an oligopoly.||Monopoly has sole control over the pricing of the product.|
|Competition type||Oligopoly firms may collide with each other rather than compete with one another.||As mentioned, there is no competition, hence no chance of collusion|
After reading the above statements, one may think that a monopoly kind of competition will never fail, but that’s not true. Take the example of XYZ firm, which is trying to sell a product that is unique in its form. Still, the same product is disliked by the consumers or the customers where it’s trying to sell them, and yes, that is the scenario where this XYZ firm appears to be dominating, but in the end, it will fail miserably and make losses. So, it’s not always that monopoly competition is successful and always makes a profit.
On the flip side, oligopolies can collide and become one firm in the industry, remove the price wars, and charge their consumers or the customers they want. In an oligopoly kind of competition, collusion is one of the most typical infractions to lead to anti-trust proceedings.
E.g. In 2012, the Department of Justice in the US sued 6 major book publishers for fixing the price of electronic books.
This has been a guide to the top difference between Oligopoly vs Monopoly. Here, we also discuss the Oligopoly vs Monopoly key differences with infographics and comparison tables. You may also have a look at the following articles to learn more.