Oligopoly IB

Your comprehensive resource for mastering oligopoly in IB Economics - from game theory and strategic behaviour to real-world market analysis and policy implications

Oligopoly represents one of the most fascinating and relevant market structures in modern economics, where strategic interdependence creates a complex web of competitive and cooperative behaviours. This comprehensive hub covers every aspect of oligopoly you'll encounter in your IB Economics course, from fundamental theory and models to cutting-edge analysis of tech giants, banking cartels, and global market concentration.

What You'll Master:

• Complete IB Economics oligopoly theory and strategic interaction models

• Game theory applications and Nash equilibrium analysis

• All oligopoly models: kinked demand curve, collusion, and price leadership

• Current global oligopolies from Big Tech to airlines

• Policy responses and competition law

• Links between oligopoly and other key IB economics topics

Full breakdowns of diagrams and evaluation tools are available exclusively in the IB Economics course.

Fundamental Theory & Concepts

Core Theory Posts

What Is Oligopoly Really? - IB Economics Definition Understanding market structures where few firms dominate, creating strategic interdependence and complex competitive dynamics.

Oligopoly definition | Market concentration | Strategic interdependence | Barriers to entry | Few sellers | Mutual interdependence

Concentration Ratios - Measuring Market Power How to calculate and interpret concentration ratios to identify oligopolistic market structures.

Concentration ratios | Four-firm ratio | Eight-firm ratio | Market share | Herfindahl index | Market dominance

Strategic Interdependence - The Core of Oligopoly Why firms in oligopoly must consider rivals' reactions when making decisions about price, output, and strategy.

Strategic interdependence | Mutual dependence | Game theory | Strategic behaviour | Decision making | Rival reactions

Oligopoly vs Other Market Structures - Key Differences Comparing oligopoly with perfect competition, monopolistic competition, and monopoly.

Market structures | Competition spectrum | Imperfect competition | Market comparison | Structure analysis | Competition types

Game Theory Analysis For IB Economics

The Prisoner's Dilemma - Understanding Strategic Choices How the prisoner's dilemma illustrates the tension between cooperation and competition in oligopoly.

Prisoner's dilemma | Game theory | Dominant strategy | Nash equilibrium | Strategic games | Payoff matrix

Nash Equilibrium in Oligopoly - Stable Outcomes Finding equilibrium strategies where no firm wants to change its behaviour given rivals' choices.

Nash equilibrium | Game theory | Stable strategies | Equilibrium analysis | Strategic stability | Best response

Payoff Matrices - Visualising Strategic Options Using payoff matrices to analyse strategic choices in pricing, output, and market entry decisions.

Payoff matrices | Strategic analysis | Game theory | Decision tools | Visual models | Strategy evaluation

IB Economics Oligopoly Models

Kinked Demand Curve

The Kinked Demand Curve Model - Price Rigidity Explained Understanding why prices in oligopoly tend to be stable despite changing costs.

Kinked demand curve | Price rigidity | Sticky prices | Demand elasticity | Price stability | Non-collusive oligopoly

Limitations of the Kinked Demand Model - Critical Analysis Evaluating the strengths and weaknesses of the kinked demand curve as an oligopoly model.

Model limitations | Critical evaluation | Theory assessment | Model assumptions | Real-world application | Alternative models

Price Wars and the Kinked Demand Curve - Breaking Point When and why oligopolies abandon price stability and engage in destructive price competition.

Price wars | Competition strategy | Market breakdown | Price cutting | Strategic rivalry | Market instability

Collusive Oligopoly

Formal Collusion - Cartels and Price Fixing How firms explicitly coordinate to maximise joint profits through price and output agreements.

Cartels | Collusion | Price fixing | OPEC | Market manipulation | Illegal agreements

Tacit Collusion - Unspoken Coordination Understanding implicit coordination through price leadership and parallel behaviour.

Tacit collusion | Price leadership | Implicit coordination | Parallel pricing | Unspoken agreements | Legal grey area

Breaking Collusion - Cheating and Enforcement Why cartels often fail and the incentives for firms to cheat on collusive agreements.

Cartel breakdown | Cheating incentives | Enforcement problems | Game theory | Agreement stability | Trust issues

OPEC Case Study - The World's Most Famous Cartel Analysing OPEC's successes, failures, and impact on global oil markets.

OPEC | Oil cartel | International trade | Commodity markets | Cartel power | Global impact

Non-Collusive Behaviour

Price Leadership Models - Dominant and Barometric How one firm can effectively coordinate market prices without explicit collusion.

Price leadership | Dominant firm | Barometric leadership | Price coordination | Market signals | Implicit cooperation

Non-Price Competition - Beyond Price Wars Why oligopolies often compete through advertising, quality, and innovation rather than price.

Non-price competition | Advertising | Product differentiation | Innovation | Brand loyalty | Quality competition

Contestable Markets and Oligopoly - Potential Competition How the threat of entry can discipline oligopolistic behaviour even with few firms.

Contestable markets | Potential competition | Entry threat | Hit and run | Market discipline | Behavioural constraints

Oligopoly Real-World Applications & Case Studies For Your IB Economics Course

Current Global Oligopolies (2024-2025)

Big Tech Oligopoly - The Digital Giants How Google (92% search market), Meta (70% social networks), Microsoft (87% PC operating systems) dominate digital markets.

Big Tech | Digital monopolies | Platform economics | Network effects | Tech regulation | Market dominance

Global Airlines - Strategic Alliances and Competition The complex oligopolistic structure of international aviation with alliances and route dominance.

Airline oligopoly | Strategic alliances | Route competition | Barriers to entry | Aviation economics | Global networks

Streaming Services - The New Media Oligopoly Netflix, Disney+, Amazon Prime, and others battling for global entertainment dominance.

Streaming oligopoly | Content wars | Platform competition | Subscription models | Media concentration | Digital entertainment

Semiconductor Manufacturing - The Chip Oligopoly TSMC, Samsung, and Intel's dominance in advanced chip production and global implications.

Semiconductor oligopoly | Chip shortage | Technology dependence | Manufacturing concentration | Global supply chains | Strategic importance

UK-Specific Oligopolies

UK Supermarket Oligopoly - The Big Four Tesco, Sainsbury's, Asda, and Morrisons controlling over 70% of UK grocery market. UK Supermarket Oligopoly: Effects, Features | StudySmarter

UK supermarkets | Grocery oligopoly | Market concentration | Price matching | Non-price competition | Consumer impact

UK Banking Oligopoly - Too Big to Fail The Big Six banks' dominance and implications for financial stability and competition. Consumers may grumble, but these oligopolies are great for investors - The Globe and Mail

UK banking | Financial oligopoly | Systemic risk | Barriers to entry | Financial regulation | Market power

UK Energy Market - From Big Six to Big Five Evolution of UK energy oligopoly with 78% market share and regulatory interventions.

UK energy | Utility oligopoly | Price regulation | Market reform | Consumer switching | Ofgem oversight

UK Mobile Networks - The Four Giants Vodafone, EE, O2, and Three's control of UK mobile telecommunications.

UK telecoms | Mobile oligopoly | Network competition | Spectrum auctions | Infrastructure sharing | 5G rollout

Sector-Specific Oligopolies

Pharmaceutical Giants - Patents and Power How patent protection creates temporary monopolies that evolve into oligopolistic competition.

Pharma oligopoly | Patent power | R&D competition | Drug pricing | Innovation incentives | Health economics

Oil and Gas Majors - Global Energy Oligopoly ExxonMobil, Chevron, Shell, and BP's continued dominance despite renewable transition.

Oil oligopoly | Energy markets | Natural resources | Global competition | Climate transition | Resource control

Soft Drinks Duopoly - Coca-Cola vs Pepsi The classic duopoly with intense non-price competition and global market control.

Soft drinks | Duopoly | Brand competition | Marketing wars | Global reach | Consumer loyalty

Gaming Console Oligopoly - PlayStation, Xbox, Nintendo The three-way battle for gaming dominance through exclusive content and technology.

Gaming oligopoly | Console wars | Platform exclusives | Network effects | Technology cycles | Entertainment oligopoly

IB Economics Oligopoly Strategic Behaviour & Competition

Pricing Strategies

Predatory Pricing - Eliminating Competition Using below-cost pricing to drive out competitors and establish market dominance.

Predatory pricing | Anti-competitive | Price wars | Market exit | Competition law | Strategic pricing

Limit Pricing - Deterring Entry Setting prices low enough to make entry unprofitable for potential competitors.

Limit pricing | Entry deterrence | Strategic barriers | Pricing strategy | Market protection | Incumbent advantage

Price Discrimination in Oligopoly - Segmenting Markets How oligopolies use market power to charge different prices to different consumers.

Price discrimination | Market segmentation | Consumer surplus | Profit maximisation | Pricing power | Market exploitation

Non-Price Competition

Advertising Wars - Building Brand Power Why oligopolies spend heavily on marketing to differentiate products and build loyalty.

Advertising competition | Brand building | Marketing spend | Product differentiation | Consumer psychology | Competitive advantage

Innovation and R&D - The Technology Race How oligopolistic competition drives innovation in pharmaceuticals, technology, and automobiles.

Innovation competition | R&D spending | Technology race | Patent races | First-mover advantage | Dynamic efficiency

Quality Competition - Premium Positioning Competing through product quality, features, and customer service rather than price.

Quality competition | Product features | Service quality | Premium markets | Differentiation | Value proposition

Loyalty Programs - Locking in Consumers How oligopolies use rewards programs to increase switching costs and retain customers.

Loyalty programs | Switching costs | Customer retention | Lock-in effects | Behavioural economics | Consumer habits

Oligopoly Government Intervention & Regulation

Competition Policy

Antitrust Laws - Breaking Up Power How governments use competition law to prevent and punish anti-competitive behaviour.

Antitrust law | Competition policy | Market regulation | Merger control | Legal framework | Enforcement

Merger Control - Preventing Concentration Regulatory approval processes for mergers that might create or strengthen oligopolies.

Merger control | Competition authority | Market concentration | Regulatory approval | Structural remedies | Pre-merger notification

Price Regulation - Controlling Oligopoly Power Direct price controls and caps in industries like utilities and telecommunications.

Price regulation | Price caps | Utility regulation | RPI-X | Regulatory oversight | Consumer protection

Behavioural Remedies - Changing Conduct Regulatory interventions that change firm behaviour without breaking up companies.

Behavioural remedies | Conduct regulation | Competition remedies | Market oversight | Regulatory tools | Compliance

International Dimensions

Cross-Border Oligopolies - Global Market Power How multinational oligopolies operate across jurisdictions and regulatory frameworks.

Global oligopoly | Multinational power | Cross-border markets | International regulation | Regulatory arbitrage | Global competition

Trade and Oligopoly - Strategic Trade Theory How oligopolistic competition affects international trade patterns and policy.

Strategic trade | Trade policy | Export subsidies | Import protection | National champions | Trade theory

Digital Markets Act - Regulating Tech Giants The EU's landmark legislation targeting Big Tech oligopolies and platform power.

Digital regulation | Tech policy | Platform regulation | EU law | Gatekeeper rules | Digital competition

Oligopoly Cross-Topic Connections For Your IB Economics Course

Market Power and Efficiency

Oligopoly and Allocative Efficiency - Welfare Loss How oligopolistic pricing creates deadweight loss and reduces consumer welfare.

Allocative efficiency | Welfare loss | Deadweight loss | Consumer surplus | Efficiency analysis | Market failure

Dynamic Efficiency in Oligopoly - Innovation Trade-offs Balancing static inefficiency against dynamic gains from R&D and innovation.

Dynamic efficiency | Innovation | R&D investment | Long-run efficiency | Technology progress | Efficiency trade-offs

X-Inefficiency - Lack of Competitive Pressure How reduced competition can lead to organisational slack and higher costs.

X-inefficiency | Organisational slack | Cost efficiency | Competitive pressure | Management efficiency | Internal efficiency

Development Economics

Oligopolies in Developing Countries - Concentrated Power How oligopolistic structures can hinder economic development and perpetuate inequality.

Development | Market concentration | Inequality | Market access | Competition policy | Institutional weakness

Import Substitution and Oligopoly - Protected Markets How trade protection can create domestic oligopolies with negative development impacts.

Import substitution | Trade protection | Domestic oligopoly | Industrial policy | Market structure | Development strategy

Macroeconomic Implications

Oligopoly and Inflation - Price Stickiness How oligopolistic price rigidity affects macroeconomic adjustment and monetary policy.

Price stickiness | Inflation | Monetary policy | Macroeconomic adjustment | Price flexibility | Policy transmission

Market Power and Income Distribution - Inequality Effects How oligopolistic profits contribute to income inequality and wealth concentration.

Income distribution | Profit concentration | Wealth inequality | Market power | Distribution effects | Social impact

Oligopoly Current Statistics & Data (2024-2025) For Your IB Economics Course

Key Global Oligopoly Indicators

• Tech Concentration: Google controls 92% of search, Facebook 70% of social networks, Microsoft 87% of PC operating systems

• Banking Concentration: Top 4 banks control over 70% of deposits in many developed countries

• Airline Consolidation: Top 4 US carriers control 80% of domestic passenger traffic

• Streaming Market: Top 5 platforms control 85% of global streaming subscriptions

• Semiconductor Production: Top 3 manufacturers control 80% of advanced chip production

UK-Specific Oligopoly Data

• Supermarket Share: Big Four control over 70% of UK grocery market (2024)

• Banking Concentration: Top 4 UK banks control 77% of personal current accounts

• Energy Market: Big Six (now Five) control 70% of household energy supply

• Mobile Networks: Four operators control 99% of UK mobile subscriptions

• Fuel Retail: Six major suppliers dominate UK petrol station market

Industry Concentration Trends

• Increasing Concentration: 75% of US industries became more concentrated 1997-2012

• Digital Dominance: Platform economies showing winner-take-all dynamics

• Global Consolidation: Cross-border mergers creating international oligopolies

• Regulatory Response: 50+ countries strengthening competition laws since 2020

• New Oligopolies: Emerging in renewable energy, electric vehicles, and AI

IB Economics Oligopoly Exam Excellence

Question Techniques

Evaluating Oligopoly Outcomes - Paper 3 Framework Structured approach to analysing efficiency, equity, and policy implications of oligopolistic markets.

IB Economics evaluation | Oligopoly analysis | Paper 3 techniques | Policy evaluation | Market assessment | Answer structure

Game Theory in Exams - Payoff Matrix Analysis Step-by-step guide to constructing and interpreting game theory models in exam conditions.

Game theory exams | Payoff matrices | Nash equilibrium | Exam technique | Model construction | Strategic analysis

Oligopoly Diagrams - Visual Mastery Essential diagrams including kinked demand curve, collusion models, and game theory matrices.

Oligopoly diagrams | Kinked demand | Visual analysis | Diagram technique | Graphical models | Exam drawings

Real-World Examples - Application Skills Using current oligopoly examples effectively to support theoretical analysis.

Real examples | Current events | Application skills | Evidence use | Contemporary analysis | Exam relevance

IB Economics Oligopoly Model Answers

15-Mark Oligopoly Essays - Structure and Content Breaking down high-scoring essay responses on oligopoly theory and policy.

Essay structure | 15-mark questions | Oligopoly essays | High scores | Answer technique | Essay skills

Data Response - Oligopoly Statistics Interpreting concentration ratios, market share data, and profitability measures.

Data response | Statistical analysis | Oligopoly data | Quantitative skills | Data interpretation | Paper 1 skills

Policy Evaluation - Competition Interventions Assessing the effectiveness of different government responses to oligopoly power.

Policy evaluation | Government intervention | Competition policy | Evaluation framework | Policy analysis | Critical thinking

Oligopoly Emerging Issues & Future Trends For Your IB Economics Course

Digital Platform Oligopolies

Network Effects and Winner-Take-All - Digital Dynamics How network effects create natural oligopolies in digital markets.

Network effects | Platform economics | Digital oligopoly | Winner-take-all | Market tipping | Tech dominance

Data as Competitive Advantage - The New Oil How data collection and analysis create insurmountable advantages for tech oligopolies.

Data monopoly | Information advantage | Big data | Competitive moat | Privacy concerns | Market power

Platform Regulation - Global Responses Comparing regulatory approaches to platform power across jurisdictions.

Platform regulation | Digital policy | Global regulation | Tech governance | Regulatory innovation | Policy coordination

Future Oligopolies

Artificial Intelligence - The Next Concentration How AI development costs and data requirements may create new oligopolistic structures.

AI oligopoly | Technology concentration | Development costs | Data requirements | Future markets | Innovation control

Green Energy Oligopolies - Renewable Concentration Emerging concentration in solar, wind, and battery technologies.

Renewable oligopoly | Green energy | Technology control | Climate economics | Energy transition | Market structure

Space Economy - The Final Oligopoly How SpaceX, Blue Origin, and others are creating oligopolistic space markets.

Space oligopoly | Commercial space | Market pioneers | Infrastructure control | Future economics | Extraterrestrial markets

Why This Hub Matters for Your IB Economics Success

Understanding oligopoly is crucial for analysing real-world markets where neither perfect competition nor monopoly accurately describes firm behaviour. Every post in this hub connects to your broader IB Economics understanding, whether you're examining market structures, government intervention, international trade, or development economics.

For Maximum IB Economics Exam Success:

• Master game theory and strategic interaction models

• Use current oligopoly examples from this hub in essays

• Connect oligopoly analysis to efficiency, equity, and market failure

• Develop sophisticated evaluation of competition policy to excel in your IB Economics course

• Practice applying models to real-world case studies

Ready to Master Oligopoly? Start with the fundamental theory posts to build your foundation, then explore the real-world applications that connect to your other IB Economics topics. Each post builds your analytical skills while providing concrete examples for exam success.

This hub is regularly updated with the latest market developments, regulatory changes, and exam requirements. Bookmark this page and return regularly as you progress through your IB Economics course.

For access to all key diagrams, model answers, and exam strategies,

Explore the Complete IB Economics Course

Are you having problems with your IB Economics IA?

Download the complete guide here (Free Download)