IntroductionOligopoly, from the ancient Greek όλίγοι "few" and πώλης "seller" (Woodhouse, 2002), defines the market with a small number of large players. (Begg and Ward, 2009, black and white). To demonstrate a clear understanding of what it is and how it works, this essay will be tacitly divided into two sections. In the first section I will discuss the definition of oligopoly, the demand curve, the main characteristics and price setting. In the second, I illustrate oligopoly by reference to the UK beer market and the extent to which this sector could support price fixing. Oligopoly: definition In a monopoly regime a company has no rivals (Rittenberg and Tregarthen, 2009). In contrast, in perfect competition many small firms coexist, none of which has the power to influence prices (Sloman and Sutcliffe, 2001). Equally important, as a combination of monopoly and competition, monopolistic competition represents the market with free entry and many competing firms. However, each firm produces a differentiated product and therefore has some control over its price. Finally, oligopoly exists when a few large firms can erect barriers to entry and share a large percentage of the industry. Furthermore, firms are aware of their rivals and concerned about their response to competitive challenges (Allen, 1988). As a result, oligopolies operate under conditions of imperfect competition. Demand Curve Oligopolies have distorted demand curves. These curves are downward sloping, similar to traditional ones. However, they are distinguished by a convex curvature at a discontinuity. This change in elasticity shows that price increases will not be offset by competitors, but price reductions will (B&W). Therefore, companies will tend not to increase prices because a small increase will cause them to lose customers...... middle of paper ......n_law [Accessed 11/21/2010].Rittenberg, L. and Tregarthen, T (2009). Principles of Microeconomics, 2nd Edition. New York: Flat World Knowledge, Inc. Routledge, R. (2010). Bertrand competition with cost uncertainty. Economics Letters, n. 107, pp. 356–359. Sab-Miller relationship. (2003). On-trade and off-trade. Available at: http://www.sabmiller.com/files/presentations/2003/000503/may03_ontradeofftrade_slides.pdf [Accessed 11/21/2010].Sloman, J., & Sutcliffe, M. (2001). Economics for Business, 2nd edition. Harlow: Pearson Education Limited.Vives, X. (2001). Oligopolistic pricing: old ideas and new tools. Cambridge, MA: The MIT Press.Woodhouse, S. (2002) English-Greek Dictionary: A Vocabulary of the Attic Language. 10th edition. Padstow: TJI Digital.World Bank. (2010). Indicators by country. Available at: [Logged in on 16/11/2010].