Answer:
1. An industry dominated by a small number of large firms
2. Firms sell either identical or differentiated products
3. The industry has significant barriers to entry
This fact is recognized by all the firms in an oligopolistic industry. If a small number of sizable firms constitute an industry and one of these firms starts advertising campaign on a big scale or designs a new model of the product which immediately captures the market, it will surely provoke countermoves on the part of rival firms in the industry. Thus different firms are closely inter dependent on each other.
