Characteristics of an Oligopoly:

1. High Barriers to Entry and Exit: Oligopolistic markets typically feature high barriers that deter new firms from entering the industry. These barriers could include significant capital requirements, government regulations, economies of scale, or access to distribution channels. High exit barriers can also discourage firms from leaving the market.
2. High Concentration Ratio: Oligopolies are characterized by a high concentration of market share held by a small number of dominant firms. In such markets, a few key players supply the majority of the products or services. For instance, the UK supermarket industry is an example of an oligopoly, with a small number of major grocery store chains holding significant market share.
3. Interdependence of Firms: In oligopolistic markets, firms are interdependent, meaning that their decisions and actions have a direct impact on the behavior of other firms in the industry. This interdependence can lead to complex strategic interactions, such as price wars, collusion, or strategic alliances.
4. Product Differentiation: Oligopolistic firms often differentiate their products to distinguish themselves from their competitors. This differentiation can take the form of branding, unique features, or variations in quality. The degree of product differentiation can influence the level of competition within the market.

Oligopoly as a Market Structure and Behavior:

Oligopoly can refer both to the market structure itself and the behavior of the firms within that market. Some markets are inherently oligopolistic due to factors like high barriers to entry, while in other cases, multiple firms may display oligopolistic behavior, which includes interdependence, stable prices, collusion (explicit or tacit), and non-price competition, even if the market isn't strictly an oligopoly.

Reasons for Non-Price Competition:

Non-price competition involves firms competing in ways other than through price changes. Some reasons for non-price competition include:

1. Product Differentiation: Firms may focus on product quality, design, or unique features to make their products more attractive to consumers. This can lead to brand loyalty and a competitive edge without lowering prices.
2. Advertising and Marketing: Firms invest in advertising and marketing campaigns to build brand awareness and promote their products. Effective advertising can influence consumer preferences and increase sales.
3. Customer Service: Providing exceptional customer service and support can set a firm apart from its competitors. Excellent customer experiences can lead to customer loyalty and positive word-of-mouth marketing.
4. Innovation: Developing new and innovative products or services can give a firm a competitive advantage. Cutting-edge technology, features, or design can attract customers.
5. Distribution Channels: Efficient and widespread distribution networks can make products more accessible to consumers. This ease of access can be a competitive factor.

Operation of Cartels:

A cartel is a collaboration among two or more firms in an industry with the aim of controlling certain aspects of the market. The operation of cartels typically involves:

1. Price Fixing: Cartel members agree to set and maintain specific prices for their products or services. This can lead to artificially inflated prices.
2. Output Limitation: Cartel members may restrict the quantity of goods or services they produce to maintain higher prices.
3. Market Division: In some cases, cartels divide markets among members, allowing each firm to operate without direct competition in certain regions or segments.