Oligopoly is a market situation in which there are few firms producing either differential goods or closely differential goods. The number of firms is so small that every seller is affected by the activities of the others. Features :
v Few Sellers: There are few sellers in oligopoly market, such that number of sellers is small that each and every seller is affected by the activities of the others.
v Interdependence: Interdependence among firms is the most important characteristic under Oligopoly. The number of sellers is so less in the market that each of these firms contribute a significant portion of the total output. As a result, when any one of them undertakes any measure to promote sales, it directly affect other firms and they also immediately react. Hence every firm decides its policy after taking into consideration the possible reaction of the rival firm. Thus every firm is affected by the activities of the other firms and this is called interdependence of firm.
v Nature of Product: A firm under oligopoly may produce homogenous goods which is called oligopoly without product differentiation for eg. Cooking gas supplied by Indian Oil & HP. Oligopoly may also produce differential products which is called oligopoly with product differentiation for eg. Automobile Industry. (iv) Barrier to Entry : The existence of oligopoly in the long run requires the existence of barrier to the entry of the new firms. Several factors such as unlimited size of the market, requirement of huge initial investment etc. creates such barrier upon the entry of new firms.