There are a number of reasons why oligopolies exist, with economies of scale likely being the most prevalent. Only very large enterprises are able to produce at the lowest average cost if these factors are significant, as they are in the automobile sector, for instance. Because of this, it is practically impossible for new companies to enter the market. While starting at the required very large scale would require far more capital than an unestablished firm is likely to be able to raise before proving it will be successful, a small firm would not be able to produce at the lowest cost and would quickly be forced out of business. Other entry-level barriers include oligopolist patent ownership and perhaps aggressive advertising that prevents would-be newcomers from becoming recognized by the general public. The desire to unite is the last urge. By giving the burgeoning oligopolists more monopoly power, mergers have the obvious advantage of reducing competition. Additionally, they might lead to additional economies of scale, raising the barrier to entry for new competitors. Manufacturers of autos, ovens, refrigerators, personal computers, gasoline, and courier services are among the oligopolies we deal with. Oligopoly differs from monopolistic competition in that it has few enterprises as opposed to many, is mutually dependent on prices, has differentiated or homogeneous products as opposed to all having differentiation, and has severe entrance barriers. Both actively compete in non-price-based markets.
