In the economy of the United States, there are five basic but common features of oligopoly market. At the top of this list is the presence of a firm with its products having monopoly power. Monopoly is simply one of the types of Perfect Competition. A firm with the most market power in any given area competes with other firms who also have poly or near-monopoly power. There are a few exceptions to the Perfect Competition principle.
In an economy where the firms compete on the basis of imperfect knowledge, the knowledge of the firm with the most overall prior knowledge and resources can still be abused. If firms have monopoly power, they can restrict the entry of other firms to the knowledge and resources that they already possess. Thus, an economy where there are many firms will usually have a large and diverse economic base. Although each firm has a similar product and its customers have similar needs, each firm has a certain amount of excess capacity relative to its current input.
Features of oligopoly market are due to the way in which firms with monopoly power interact with each other and with the rest of the economy. Each firm wants to maintain its position above the others, for its own growth and expansion and so each seeks to promote its own expansion by increasing its market share, through price manipulation or innovation, through licensing, through acquisitions and through subsidies. The result is a situation where there are great inefficiency and a situation where a large concentration of firms operating in a highly competitive area is fostered. These conditions are conducive to political influences which may favor a government intervention to correct what are usually substantial market distortions and also to boost economic welfare.
The features of oligopoly market of high inefficiency and severe price concentration is the chief reason why a majority of economic textbooks describe the economic theories of oligopoly as a zero sum game. There is a kind of "race" involved here, between different firms. A firm cannot grow, until all the other firms are forced to become surplus to the point where they can no longer afford to operate. At the same time, all the firms increase their own costs and reduce their profits, leading to yet another zero-sum game.
On the other hand, because of the existence of a powerful trend of concentration, an increasing number of firms can be controlled by the same set of owners. The resulting situation is described as a heterogeneous economy. In a heterogeneous economy, each firm concentrates at a higher level than the other firms, on the one hand. Each firm competes for sales, creating and retaining a competitive edge over the other firms. The end result is a situation where, for any given set of goods and services, customers are offered different goods and services at different prices. For instance, in the United States, it is common to see that prices differ significantly even for the same basic service, between firms located in the same market area.
The features of oligopoly market, which results from the existence of too many firms competing for the same market, is that it is based on the concept of economies of scale. Instead of being driven by customer demands, the firm has to consider the cost of production and how it will offset this with its profits. Even worse, in the long run, economies of scale do not benefit the customer. They reduce efficiency and cause prices to rise so that the firm can't make any profit, no matter how much it charges for a given product. That's why a new entry, an enterprising firm, needs to be creative to get onto an oligopoly stage as quickly as possible - it needs to come up with a different model of operation, a model that breaks the existing trend of consolidation and leads to an environment where there is ample room for new entrants
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