Oligopoly vs. Monopoly

The leading trait of a perfect competition is one where the consumer is indifferent to the products of competing firms, and there are no barriers to entering the market. Monopolies and oligopolies are economic market conditions, in which perfect competition doesn't exist, and the consumer has little choice when deciding upon a product or service, meaning there is no parity when it comes to firm competition.

An oligopoly occurs when just a few firms dominate the market. These firms sell a product in which they have competitors, but the combination of these firms dominates the market. Think of the U.S. wireless phone industry. There are just four providers, Verizon, AT&T, Sprint and T-Mobile. Consumers have very little choice when selecting a provider, since they are required to select from a small handful of firms that compete amongst themselves, and not the market as a whole.

For a competing firm to enter an oligopoly, there are some barriers, but not as many as a monopoly. For example, a competitor could enter the wireless phone industry, and while it would be somewhat difficult, it wouldn't be impossible.

A monopoly is a market when only one firm dominates, and the consumer has no choice between competing products. That one firm is referred to as a monopolist. Monopolies occur when possible competitors are unable to enter the market, due to the competitive pressure from the monopolist.

Unlike an oligopoly, monopolies do not have to worry about the actions of their competitors, since there are none. For example, the DeBeers diamond company has a monopoly on the diamond market. For a competing firm to enter the diamond market, they would need to find a new source of diamonds, which is both cost prohibitive and difficult to procure, making it nearly impossible. Since there is a monopoly, DeBeers can charge whatever they want, since there is no competition.

The most desirable market is one in which there is perfect competition. Both oligopolies and monopolies stray from this ideal, and bring unfair competition to the market. Remember, oligopolies refer to the number of firms, and monopolies refer to the mixture of the products.