An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). The word is derived from the Greek for few sellers. Because there are few participants in this type of market, each oligopolist is aware of the actions of the others. The decisions of one firm influence, and are influenced by the decisions of other firms. Strategic planning collusion. by oligopolists always involves taking into account the likely responses of the other market participants. This causes oligopolistic markets and industries to be at the highest risk for collusion.

In an oligopoly, firms operate under imperfect competition and a kinked demand curve which reflects inelasticity below market price and elasticity above market price, the product or service firms offer, are differentiated and barriers to entry are strong. Following from the fierce price competitiveness created by this sticky-upward demand curve, firms utilize non-price competition in order to accrue greater revenue and market share.

This is a market structure where there are few firms dealing in either homogeneous or differentiated products. It is for this reason that oligopoly is commonly referred to as "market of the few firms" Two types of oligopoly exist, namely,

Pure or perfect oligopoly: This is where there are a few firms ( sellers) producing homogeneous products with close interdependence, so that the price and output decisions of one firm affect the price and output decisions of other firms in the industry. Examples of perfect oligopoly in Uganda include petrol stations e.g petro, shell, Gapco, total , Agip, caltex etc..

Imperfect or differentiated oligopoly:- Here, there are few firms dealing in differentiated products so that the price and output decisions of one firm will not adversely and immediately affect the price and output decisions of other firms. Product differentiation means that the products are close but not perfect substitutes for each other.