Oligopoly Theory Meets Practice: Collusion, Innovation, and Market Concentration in the 21st Century

In the 21st century, oligopolistic markets have become central to understanding economic dynamics, where a few dominant firms shape competition, innovation, and growth. This review addresses the nexus of oligopoly theory and practice in the real world, and it identifies collusion, innovation, and market concentration. On the basis of economic literature, it recognises erosion of competition in developed and emerging economies, leading to higher market power, reduced business dynamism, and implications for inclusive growth. Collusion implicit and explicit enables companies to set high prices, hurting the poor more and killing productivity. Innovation driven by Schumpeterian creative destruction can spur growth but increases top income inequality following an inverted-U path with trade-offs in patent rights and degree of competition. Market concentration, measured by tools like the Herfindahl-Hirschman Index (HHI), arises due to economies of scale and network effects, such as in Big Tech and agriculture, with regressive impacts on consumers and labour shares. Within the Nigerian context of being part of sub-Saharan Africa, high mark-ups in non-tradable sectors enlarge poverty and inequality, while anti-competitive behaviour raises the cost of living and limits exports. The review compares theoretical paradigms (e.g., Cournot, Bertrand) to real gaps in digital and global markets, suggesting that the regulation should be adjusted to encourage the dynamic competition and equitable development. Results suggest that policies should manage the trade-offs between efforts to encourage innovation and instruments against concentrations to combat their adverse impacts, and they indicate opportunities of future research in new economic constellations.