In which market structure do firms act independently to influence market prices?

In an oligopoly market structure, a small number of firms dominate the market. These firms possess significant market power and are able to influence prices, but they must also consider the actions and potential reactions of their competitors. This interdependence means that each firm’s pricing and output decisions can affect the entire market, leading to a strategic approach where companies may collaborate or compete in various ways.

Firms in an oligopoly often engage in practices like price setting or output restrictions, which can lead to higher prices compared to more competitive market structures. This behavior results from the limited number of players in the market, as each firm recognizes that its decisions will have direct implications for its rivals and vice versa.

In contrast, in a monopoly, a single firm controls the market and can set prices without concern for competition. In pure competition, many firms compete, but no single firm can influence market prices due to the presence of numerous competitors offering identical products. The commodity market typically refers to a broad range of goods traded internationally, often reflecting characteristics of competitive or oligopolistic markets, but does not specifically describe the behavior of firms in influencing prices independently.

Therefore, oligopoly is identified as the market structure where firms act independently, yet are influenced by the actions of their few