When a small number of firms, as opposed to a single firm is involved in controlling the majority of the market share, collectively the firms are known as an oligopoly. While they may appear as each other’s competitors, the tendency is for them to cooperate with each other in terms of price setting.
For example…
In the United States, there are three main car manufacturers: General Motors Corporation (GMC), Chrysler and Ford and together they form the auto industry oligopoly. When GMC started offering employee discounts rates for all customers, both Ford and Chrysler followed suit, illustrating the typical responses of firms that make up an oligopoly.
