IntroductionOligopoly, from the ancient Greek όλίγοι “few” and πώλης “seller” (Woodhouse, 2002), defines the market with a small number of large actors. (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, demand curve, its main characteristics and price setting. In the second, I will illustrate oligopoly by reference to the UK beer market and the extent to which this industry could support price fixing. Oligopoly: definition Under monopoly, 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 freedom to enter and many firms competing. However, each company produces a differentiated product and therefore has some control over its price. Finally, oligopoly exists when few large companies can erect barriers to entry and share a large portion of the industry. Additionally, firms are aware of their rivals and concerned about their response to competitive challenges (Allen, 1988). Therefore, oligopolies operate in a context of imperfect competition. Demand Curve Oligopolies have kinked demand curves. These curves are descending, similar to traditional curves. However, they are distinguished by a convex curvature at a discontinuity. This change in elasticity shows that price increases will not be compensated by competitors, but price reductions will (B&W). Therefore, companies will tend not to increase their prices because a slight increase will cause them to lose customers...... middle of article ......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, no. 107, p. 356-359. Sab-Miller Report. (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. and Sutcliffe, M. (2001). Economics for Business, 2nd Edition. Harlow: Pearson Education Limited. Vives, X. (2001). Oligopoly 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 on: [Consulted on 16/11/2010].