Monopoly vs. Oligopoly. What’s the difference between these two terms? In the following post, I break down the difference and give examples of each.
I remember taking an economics class back in college and we had to learn the difference between these two terms.
The first term my prof talked about was monopoly.
I quickly looked up and paid full attention because I love Monopoly! That board game is awesome! But that wasn’t what he was talking about.
Rather he was talking about the economic term.
Now, I don’t remember the exact definition he gave the class, but here’s what a monopoly is, according to Investopedia:
“A monopoly refers to when a company and its product offerings dominate a sector or industry.”
Okay, so there aren’t too many monopolies that exist just because pure monopolies are against the law in most places. A company isn’t allowed to dominate any one sector because it has to allow for competition, which is good for the consumer because it gives them choices.
Wow, that was a mouthful!
The next term he talked about was oligopoly. Again, I don’t remember the exact definition he gave (it has been well over 10 years), so I’m going to refer to Investopedia:
“Oligopoly is a market structure with a small number of firms, none of which can keep the others from having significant influence.”
These types of companies are very common. Telecom companies, internet providers, energy companies, gas stations, etc… providers of services tend to be oligopolies. The reason is that, aside from the laws, it gives consumers options.
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It also prevents one company from dominance, which can turn really ugly fast (i.e. the company charges whatever price they want and consumers can’t do anything about it because there’s only one provider of that necessary service).
So that’s the difference between a monopoly and an oligopoly. If you know of any companies that are pure monopolies, list them below in the comments and say why.