Why do oligopolies emerge in a market?
Answer:
Because the combination of Government, and economics give the public the power to allow these oligopolies to emerge unopposed.
The ideal market structure is one of perfect competition, where the number of firms are many and the products are homogeneous. However, this structure is largely unrealistic.
So, market forces will try to adjust themselves into a proper functioning structure. A balance is struck. Usually it's in the middle of the prism, between monopoly and monopoolistic competition.
Instead of only 1 firm controlling the market or many many small firms in the market, a few, maybe 4 or 5 firms hold more than 50% of the market share.
It's also more efficient to have an oligopolistic market. Consumers benefit from the competition between firms, such as lower prices due to lower unit costs. Consumer welfare is uphelp as the firms are in no position to exploit consumers, as it is such in the case of monopoly.
Anyway, if you look around you most products are oligopolistic in nature. Like the console gaming is controlled by X-Box, Wii, PlayStation.
Hope that answers your questions. Economics rocks! =)
God bless
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