While examining market structures one of the most frequently used case study examples look at oligopolies. This is due to the fact they are so paramount in the present day business. Oligopolies pertain to a market system wherein the industry is controlled by a small number of big sellers. It implies from this that these sellers are also leading procurers in the industry also which is known as 'oligopsony". (Market Structure: Oligopolies – Activity) Every seller has an idea that the other sellers will respond to the increase or decrease in prices and volume. An oligopoly market structure can be for either a homogenous commodity or a differentiated product. An oligopoly market condition prevails when a small number of firms control the industry with such an influence so as to fix the prices. In oligopoly, there is a presence of interdependence which is also known as strategic dependence, which is a condition wherein, a firm"s action with respect to production, prices, or product differentiation might be tactically counteracted by a single or more than one firm within the industry. These types of dependencies can only be there when a few important firms in an industry are present. .

             The most potent reason, which has been put forth for the presence of oligopoly, is economies of scale. Economies of scale are characterized as a production scenario wherein making the production twice, outcomes in less than a doubling of total costs. The average total cost curve of the firm will slope downwards with the increase in output. A reduction of the average total cost can be brought about by continuing to augment the scale of operations. When barriers to entry which includes legal barriers, like patents, and control and ownership over important provisions subsist it is said to be oligopoly. Oligopoly takes place even by mergers. When two or multiple firms amalgamate under a single ownership or control, it is said to be a merger.