An interesting fact about Oligopolies is that they often degrade into very low margin businesses. Price collusion is one way companies attempt to counter this t

An interesting fact about Oligopolies is that they often degrade into very low margin businesses. Price collusion is one way companies attempt to counter this trend. For example, OPEC is legal price collusion of oil producers to keep margins as high as possible. Price collusion is not legal in the US but some industries (i.e. airlines) have virtual collusion because they move prices in lock-step. In some ways, the US mobile phone business is like the airlines. When one carrier offers an "unlimited" plan at a specific rate, the others rush to offer something similar. This virtual price collusion falls apart when one of the companies in the oligopoly gets greedy (they almost always do). Downward price pressure is created when one company is willing to operate on lower margins short term to take market share from the others. Lower prices are good for consumers. No small company can afford to enter the market because the barriers to entry are expensive and the margins are low. The existing carriers end up in a race to the bottom that resembles a perfect competition market. The risk is that one of the companies will become large enough to become a monopoly or near monopoly and gain pricing power to raise prices without consequences.