Question

What measurement tool do we use to analyze if we have an oligopolistic structure? Why do oligopolies exist

Answer 1

There are various measurement tools including the four firm concentration ratio and eight firm concentration ratio, herfindahl index Lerner index, as well as rothschild index. Generally oligopoly market structure has few giant firms which can range from 2 to 6. The four firm concentration ratio is generally more than 60% and herfindahl index is over 2500 for a market to be oligopoly.

Oligopolies exist because few firms are able to prevent the entry of other firms in the market or they are able to restrict their sales generally by offering a differentiated product, advertising, and indulging in strategic decision making.