oducts in each of the firms reduces and the firms are subsequently able to retain their customers through brand loyalty. Furthermore, they can therefore raise their prices without loosing their customers.
Oligopoly refers to a market structure that is characterized by the existence of few but relatively large firms who dominate the market controlling the prices. "The same barriers to entry that create pure monopoly also contribute to the creation of Oligopoly".(217) The large firms act together like a cartel when eliminating competition as they also compete with each other. It is worth mentioning that the market structure has very few sellers who are very large and they sell identical or highly differentiated products. Examples of companies that are considered to be oligopolies are those in the computer, television broadcasting and pharmaceutical industries.
In my opinion some of the market structures especially the monopoly market structure and the oligopoly are failures of the markets as they are not favorable to either the buyers or sellers in the market. Monopoly firms are considered to be illegal whereas the oligopolies are considered to be natural in the markets. When the goods in either of these markets are considered to be essential and necessities for the buyers it becomes unfavorable for the buyers as the prices set are not pocket friendly. The barriers that exist in these market structures are not favorable as they also tend to oppress the small firms that try to enter into the highly dominated markets. The firms involved in these structures tend to be inefficient since they do not face a lot of competition that make them cut down their costs and produce optimally.
Pure competition market structures are the best market conditions to have as they allow for fair competition and efficiency of the markets. The buyers also get prices that are friendly and they have different choices in the market since there are very many sellers producing the same products. They have the freedom to enter and exit the market as they do not experience high costs during entry and exit. They also tend to enjoy normal profits in the long run. However the main disadvantage of this kind of market structure is that the sellers do not have sufficient funds to invest highly as they make just enough profits to maintain themselves in business. Firms do no therefore invest more in designing their products better to attract more customers.