Final answer:
An oligopoly is a market structure where a small number of large firms have significant control over the industry, affecting pricing and available services. An example from personal experience is the cellphone industry dominated by a few major carriers which exhibit mutual interdependence.
Step-by-step explanation:
An oligopoly occurs when a small number of large firms dominate a specific industry. This structure contrasts with a monopoly, where one company controls the industry. Rarely are consumer markets perfectly competitive; instead, many operate as oligopolies. As a personal reference, consider the cellphone service industry, where companies like AT&T, Verizon, and T-Mobile rule the market. This limited competition affects pricing, quality, and service options available to consumers. Oligopolistic firms are known for their mutual interdependence; the actions of one firm significantly impact the strategies of the others. These firms could drive each other to compete intensely, leading to reduced prices, similar to perfect competition. Alternatively, they could collude, resulting in higher profits akin to monopolies, but this is illegal in many jurisdictions.