An oligopoly is a market structure characterized by a small number of firms that dominate the market. These firms have significant market power, allowing them to influence prices and production levels. Due to the limited number of competitors, each firm's decisions can directly impact the others, leading to strategic behavior and interdependence. In an oligopoly, firms may engage in collusion to maximize profits, either through formal agreements or informal understandings. This can result in higher prices and reduced output compared to more competitive markets. Examples of oligopolistic industries include automobile manufacturing and telecommunications.