Oligopoly

An oligopoly is a form of government in which the power is concentrated in the hands of a few rich people who wield a disproportionate amount of power by virtue of their fiscal wealth.

While no country today can be called for having a strictly oligopolistic form of government, critics of the Russian President have alleged that the country is an oligopoly with most businesses in the hands of a few select businessmen who are close friends of the Russian President Vladimir Putin.

Oligopoly in markets

  • In economic terms, Oligopoly is when a small number of firms mutually collaborate with one another to restrict the output of produce and/or fix base prices.
  • This is done in order to achieve above normal market returns and contradicts the very principles of the free market.
  • The formation and maintenance, or dissolution, of oligopolies, can be due to economic, legal, and technological factors.
  • The global diamond industry is a form of an oligopolistic economic understanding.
  • In India, if a few firms start to collude in say, the steel manufacturing industry, they can inhibit the production and that will increase the price and thus, the profit margins of the company.

Why is the term in the news?

During the parliamentary proceedings of the monsoon session of the Parliament in the Rajya Sabha, a member of the opposition has alleged that the government is creating an oligopoly by the mismanagement of the Insolvency and the Bankruptcy Code. This will undermine free-market competition, create unfavorable market conditions for most companies and allow a select few, allegedly sympathetic to the current dispensation, to succeed.

 

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