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Question
Distinguish between perfect oligopoly and imperfect oligopoly. Also, explain the interdependence between the firms' feature of oligopoly.
Solution
| Perfect oligopoly | Imperfect oligopoly |
| If the firms produce the homogeneous the product then it is called perfect oligopoly. |
If the firm produces differentiated products then it is called imperfect oligopoly. |
| It is rare to find this type of situation. Examples: cement, steel, aluminium and chemical producing industries |
Examples: Passenger cars, cigarettes and soft drinks. |
Feature 'interdependence of firms' in an oligopoly market: In a market, the price and level of the output of one firm impact the price and level of the output of rival firms. Keeping this impact in mind, a firm decides the price and output in accordance with prevailing market conditions. Hence, a high degree of interdependence exists among competing firms, especially with regard to price and quantity of output.
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