Difference between Monopoly and Oligopoly

In field of economics, market structure is the quantity of firms producing indistinguishable items which are homogeneous. These market structures include perfect competition and imperfect competition. In this article we will discuss two types of imperfect competition that are monopoly and oligopoly. Monopoly is an economic situation whereby there is one seller that is selling totally heterogeneous item. Presently discussing Oligopoly, it is a market structure whereby there are a couple number of sellers in the market offering similar items. These two are the critical types of imperfect competition. We should proceed, to see the contrasts between these market structures i.e. monopoly and oligopoly.

Monopoly

In basic terms, monopoly signifies ‘sole to sell’. It is a circumstance of market where there are one and only seller in market for a specific product or services, supplying products to numerous clients and he have extreme control over it. The service or product sold by seller is totally unique, which don’t have any nearby substitute. Because of the strength in the entire market, they get the advantage of huge scale production. In monopoly, there is no opposition thus the prices of items are charged very high by the monopolist and price discrimination is also there.

Oligopoly

Oligopoly alludes to competition among the few’. It is economic circumstance where there exists little number of firms, offering contending items in market. Oligopoly exists in market, when two to ten sellers are there, offering similar, or marginally diverse items in the market. By, oligopoly is characterized as a circumstance when the firm sets the market policy, according to the foreseen conduct of its rivals.

Monopoly VS Oligopoly

Some contrasts related to monopoly and oligopoly are explained below

  • Definition:

Monopoly is a type of market structure where there is one seller who offers his particular item and rules the whole market.

Oligopoly is a type of market structure, where there are couples of firms in market that offers either differentiated product or homogeneous and contend in market.

  • Characteristics:

Monopoly is a firm which controls huge market share, along these lines picking up the power to set price.

Oligopoly is a little number of firms which rules the market. These firms rival one another in view of price, product differentiation, client administration and so forth.

  • Sellers:

In monopoly, there is only one seller and there is no competition in this case because of one seller.

In oligopoly, numbers of sellers are two to ten so there is competition in this case because of number of sellers.

  • Product differentiation:

In case of monopoly, product differentiation is at extreme and no substitutes of that product are available in market.

In case of oligopoly, production differentiation is not that extreme and similar products or close substitutes are available in market.

  • Prices:

In monopoly, there is price discrimination at high level and also high prices are charged.

In oligopoly, there is price discrimination but at very low level and fair or normal prices are charged.

  • Control:

In monopoly, seller has complete control on price of the product.

In oligopoly, seller has some control on the price of the products.

  • Price setter:

In monopoly, there is one seller and have no rival in market so seller set the price itself.

In oligopoly, the price is set according to the price set by the rivals of firms for the same product in market.

  • Restrictions:

In monopoly, restrictions for enter in market are there due to institutional, economic, legal and so forth.

In oligopoly, restrictions for enter in market are there because of economies of scale.

  • Examples:

Examples of monopoly are Microsoft, Google, DeBeers, Monsanto, Long Island Rail Road and so forth.

Examples of oligopoly are Health insurers, media, wireless carriers and so forth.

Conclusion

From above article we come to know that monopoly is a market structure where one seller is there and sells the unique product by charging high prices and different prices to buyers. As there is only one seller so no competition is there and seller have complete control on price and market. Some restrictions include legal, institutional and economic in case of monopoly. Microsoft and Google are the best example for monopoly. Whereas oligopoly is a market structure where two to ten sellers are there and sells similar or substitutes of different products by charging fair prices to buyers. In this case competition exists and seller has less control on prices and market. Restrictions in this case are there because of economies of scale. Examples are media, health insurers and wireless carriers.