Why is interdependence the key characteristic of oligopoly?

Expert Solution

Explanation :::

Oligopoly is such a system in which the sellers are few,This means there are two or more sellers but not innumerable,number of sellers are between two to ten.It is a market in which there are few sellers or producers who produce substitute goods.

In perfect competition there is large number of firms producing homogeneous goods,there is no firm that produce close sustitute ,so there is no question of interdependence,

In monopolistic competition also there are many firms selling near substitute products. here in this market also interdendence does not exist.

But in oligopoly There is small number of firms produciing close sustitute gods,and each firm has a sizable share of supply.If a firm changes quota or production rival firms get affected,Therefore rival firms also have to take certain actions,this actions affect the firm ,They are conscious about it,That's the reason interdependence is the key Characteristic of oligopoly

Rahul Sunny answered 1 year ago

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