In an oligopoly market, why don't individual companies change prices to be more competitive? (Select the...
In an oligopoly market, why don't individual companies change prices to be more competitive? (Select the 2 (two) correct answers)
-1. If they increase prices, they lose too much market share and profits go down.
-2. If they increase prices, they would make more money, and the other companies would also increase prices, leading to a price war that eventally would lower profits. -3. If they decreaes prices, they don't gain enough market share to offset the impact of the lower prices and profits go down.
-4. If they decrease prices, they gain too much market share, and the other companies would also lower prices, leading to lower profits.
Homework Answers
The two reasons are :
1. If they increase prices, they lose too much market share and profits go down.
2. If they decrease prices, they gain too much market share, and the other companies would also lower prices, leading to lower profits.
In these (both) cases if the firm's in oligopoly market changes price to be more competitive they will lose (I e, their profits will fall).
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