Question

There are three models of the oligopoly:

1. The ______________, in which competitors will match any price decrease and ignore any price increase.
   1. Because of this, the elasticity of demand for higher prices is ________ elastic than the elasticity of demand for price decreases.
   2. In this model, there is no incentive for any firm to change price. Why? _____________________________________________________________

2. The __________- pricing model is one in which all firms agree to fix prices.

1. Each firm finds it most profitable to charge _________ price, but only if the rivals do.
2. A _______ is a formal association in which the members display overt collusion.

3. The _________________model is one in which the largest or more senior firm changes price and the other firms follow.

Answer 1

A).

1. The _non-collusive, in which competitors will match any price decrease and ignore any price increase.
   1. Because of this, the elasticity of demand for higher prices is more elastic than the elasticity of demand for price decreases.
   2. In this model, there is no incentive for any firm to change price. Why? Because if firm lower the prices ,rival firm also lower the price ,so the firm's intention to make profit by lowering the price and selling more units fails and quantity don't increases much and profit reduced.if firm increases the price rival firm don't act ,the result :due to high price firm loss it's market share and remain loss.so that's why any firm don't want to change the price

2. The collusive pricing model is one in which all firms agree to fix prices.

1. Each firm finds it most profitable to charge same price, but only if the rivals do.
2. A cartel is a formal association in which the members display overt collusion.

3. The price leadership model is one in which the largest or more senior firm changes price and the other firms follow.