Difference Between Monopoly and Oligopoly

The difference between monopoly and oligopoly is in the number of members that constitute them .

A monopoly, in the strict sense ( see pure monopoly ) is a situation in which there is only one seller in the market. While an oligopoly is made up of few or a small number of companies that have market dominance.

In the competitive situation of monopolies and oligopolies there are more similarities than differences, because in both forms there are a series of barriers that can be natural, technological, legal or even coercive. This prevents there from being enough competitors and finding the best price and quality benefits for the consumer.

Both structures tend to benefit from economies of scale and, consequently, obtain profits from producing at lower costs than their hypothetical competitors.

Difference Between Monopoly and Oligopoly

We can compare the two market structures with the following table:

ProducerUniquesmall group
PricesYou can influence themYou can influence them (less than monopoly)
Entry barriersVery bignot so big
kind of productHomogeneousHomogeneous or differentiated

Competition in monopoly and oligopoly

The main difference between monopoly and oligopoly, as we have already said, is the number of members that have the power of the market . And, more specifically, the competition that exists between producers or sellers. So in an oligopoly, although they could operate by agreement (which would be similar to a monopoly), there are possibilities of competition.

Therefore, in the oligopoly there can be a minimum level of competition, depending on whether it is a concentrated or differentiated oligopoly.

  • concentrated oligopoly

In this type of oligopoly, the few existing companies in the market could be producing the same product and compete seeking to win the market by offering a better price.

In the concentrated oligopoly there is competition for the best price of the product.

  • differentiated oligopoly

In this case, the companies may offer the same product, but this could be differentiated by the addition of quality or added value, which encourages the consumer to prefer the best product.

In the differentiated oligopoly, there is competition for quality and added value of the product.

For its part in the monopoly we can find types such as pure , natural or artificial.