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Oligopoly Section of Market Power Article:

When several firms control a significant share of market sales, the resulting market structure is called an oligopoly or oligopsony. In this case, where oligopolies exist the market is said to be highly concentrated (Sentence published to article).

There are a few key characteristics of an oligopoly which distinguish it from other market structures. These characteristics include interdependence, high barriers to entry, there are few firms with large market share and each firm has limited independent market power. Interdependence describes the interrelatedness of oligopoly firms. Industries with high barriers to entry indicate a degree of difficulty for new firms to enter the market, these include “technology challenges, government regulations, patents, start-up costs, or education and licensing requirement”. Moreover, only a few firms make up for the most significant market share which means their market power is large as a collective. However, each firm has little to no market power independently. --> This has been PUBLISHED with correct referencing.

An oligopoly may engage in collusion, either tacit or overt, and thereby exercise market power. A group of firms that explicitly agree to affect market price or output is called a cartel.

Measurement Section of Market Power Article (changes published to article):

Concentration ratios [RS1] are the most common measures of market power. The concentration of a market can be measured by comparing the size of the company to the total size of the industry . The four-firm concentration ratio measures the percentage of total industry output attributable to the top four companies. For monopolies, the four firm ratio is 100 per cent while the ratio is zero for perfect competition. The four firm concentration domestic (U.S) ratios for cigarettes is 93%; for automobiles, 84% and for beer, 85%. '''The measure of an oligopoly’s market power varies across different opinions of economists. A study performed suggests that a concentration ratio between forty to seventy percent may suggest the firm operates as an oligopoly. Whilst this can be used as a ‘general rule of thumb’, it is important to consider other industry factors when analysing the four-firm concentration ratio.'''

'''Another common measurement is the eight-firm concentration ratio. This ratio can be used to measure the competitiveness of a firm within an industry. This ratio is very similar to the four-firm concentration ratio, only it assess the market power of the eight largest firms in the industry .''' [RS1]Link to Wikipedia article

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