All markets in which there are a small number of sellers are classified under the heading ‘oligopoly’. The adjective ‘small’ must be interpreted operationally: the number of sellers of a homogeneous or differentiated product must be such that each believes that any change in his selling price and sales, or in the quality of his product, or in his advertising expenditure, or in any other variable whose value is under his control, is likely to evoke retaliation from most or all of the other sellers. When the number of sellers is small in this operational sense, we generally find that there is a small cardinal number of sellers — that is, not less than two and perhaps not more than twenty. It is for this reason that economists decide whether or not to classify any particular market as an oligopoly by counting the number of firms: this provides a recognisable, objective and measurable criterion for classification, whereas the awareness of mutual interdependence of sales, purchase, production and advertising plans is less easily established, for it is always a matter of degree and frequently a matter of opinion.
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