Oligopoly

Oligopoly is a market structure in which a few firms dominate the industry and produce homogeneous or differentiated products. It is characterised by high barriers to entry, few sellers and significant interdependence among competitors. An example of an oligopoly is the automobile industry, where a few large firms such as Ford, General Motors, and Chrysler control a large percentage of the market.

The degree of oligopoly can be measured by the Herfindahl-Hirschman Index (HHI) which is calculated by squaring the market share of each firm competing in the market and then summing the results. This index provides a numerical measure of the intensity of competition and market concentration. The higher the HHI score, the more concentrated the market.