The number of firms in an oligopoly industry must be small enough that firms are interdependent in decision making.

Question

Quizplus · Accepted Answer

Interdependence among firms is a necessary characteristic of oligopoly, and this occurs because there are only a few firms in the industry. If there were many firms, then each individual firm would have less impact on the overall market and would not have to take into account the actions of its competitors as much. Thus, the number of firms in an oligopoly industry is small enough to create interdependence in decision making.

The Number of Firms in an Oligopoly Industry Must Be