Which of the following is a characteristic of oligopoly?

Oligopoly is defined by a market structure where a small number of firms dominate the market, allowing these firms to have significant control over pricing and output decisions. This concentration of market power can lead to collaborative behavior, such as price-fixing or market-sharing agreements, although these practices can be illegal in many jurisdictions. Because only a few firms operate in this environment, each firm's decisions can directly impact the others, resulting in strategic interactions that are a hallmark of oligopolistic markets.

This contrasts sharply with other market structures, such as perfect competition, where there are many sellers, and monopoly, where there is only one seller. In an oligopoly, firms often sell either homogeneous products, like in the case of steel or oil, or differentiated products, such as automobiles or consumer electronics, thus showing flexibility in product offerings. While barriers to entry can exist in oligopolistic markets due to high startup costs, access to distribution channels, or brand loyalty, the significant market power and strategic decision-making by a few firms define this structure.

Understanding oligopoly is crucial as it affects pricing strategies, competitive behavior, and ultimately consumer choices within that market.