What is a key feature of an oligopoly market structure?

In an oligopoly market structure, a key feature is interdependence among firms. This means that the actions of one firm directly affect the decisions and strategies of other firms within the market. In an oligopoly, which is characterized by a small number of firms, these firms must consider the potential reactions of their competitors when making decisions about pricing, output levels, and marketing strategies. This interdependence can lead to behaviors such as collusion, where firms might work together to set prices or limit production in order to maximize their profits collectively, or it can lead to competitive strategies in response to rivals' actions.

Other options illustrate different market scenarios: a high number of small firms is indicative of perfect competition, and highly differentiated products are often a characteristic of monopolistic competition. Price competition only suggests a hyper-competitive environment typically not found in oligopolies where non-price competition can also play a significant role. Thus, understanding interdependence is crucial in analyzing how firms operate within an oligopoly and how this affects market dynamics.