The main features of oligopoly are as follows: 1) Few firms: Under oligopoly, there are few large firms. The exact no. of firms is not defined. Each firm produces a significant portion of the total output. There exists severe competition among different firms and each firm try to manipulate both prices and volume of production to outsmart each other. 2) Interdependence: Firms under oligopoly are interdependent. Interdependence means that actions of one firm affect the actions of other firms. A firm considers the action and reaction of the rival firms while determining its price and output levels. A change in output or price by one firm evokes reaction from other firms operating in the market. 3) Non- Price Competition: Under oligopoly, firms are in a position to influence the prices. However, they try to avoid price competition for the fear of price war. They follow the policy of price rigidity. Price rigidity refers to a situation in which price tends to stay fixed irrespective of changes in demand and supply conditions. Firms use other methods like advertising, better services to customers, etc. to compete with each other.
