Oligopoly is a market structure in which only a few sellers offer similar or identical products. It is an intermediate form of imperfect competition. OPEC is the epitome of oligopoly. Characteristics of Oligopoly: • Non-price competition • Interdependent decision making • Barriers to entry If organizations behave in a cooperative manner to mitigate competition among themselves, it is called Collusion. When two or more organizations agree to set their production or prices to maintain a monopoly, it is called a collusive oligopoly. OPEC acts like a cartel. If OPEC and other oil exporters didn't compete, they could guarantee much higher prices for everyone. Its members' production quotas produced staggering price increases ($1.10 to $11.50 a barrel in the early 1970s, and up to $34.00 in the late 1970s). : an increase of 3400% in ten years). The relative success of OPEC can be attributed to the following advantages it has enjoyed over other cartels:1. The low price elasticity of demand for oil means that moderate production restrictions raise prices in the short run – a favorable environment for a cartel. In 1973 OPEC production contributed two-thirds of total world oil production. In 1975, OPEC countries had market power of 70%.3. OPEC's effectiveness is further strengthened as only four countries (Saudi Arabia, Arabia, Kuwait, Iran and Venezuela) regulate 75% of OPEC's oil reserves.4. Exploration, production and creation of new supplies take a long time and this mitigates the threat of any challenge to OPEC resulting from increased production by non-members.5. The policies of oil-importing nations such as the United States have benefited OPEC, such as low prices that discourage production and exploration; environment…… middle of paper…… allocation of resources closer to the social optimum, politicians try to induce companies into an oligopoly to compete rather than cooperate through the instrument of antitrust laws. Regulators file lawsuits to enforce antitrust laws, for example to prevent mergers that lead to excessive market power. Conclusion: • Collusive oligopolies are more like a monopoly. However it is very fragile as self-interest to get maximum profit from members can tip the balance and lead to price war. • The success of the collusive oligopoly largely depends on the number of firms involved and their level of cooperation. • It may It should be noted that cartels are difficult to maintain in the long run, with the exception of OPEC. Politicians regulate the behavior of oligopolists through antitrust laws. The proper scope of these laws is a matter of continuing controversy.