Oligopolies really shake things up when it comes to how prices are set! Here are some important ways they affect each other’s pricing:
Interdependence: Companies in an oligopoly closely watch their competitors. If one company cuts its prices, the others might do the same to stay in the game.
Price Rigidity: Prices often stay the same because companies are afraid to start a price war. So even if costs go up or down, prices can stay pretty steady.
Collusion: Sometimes, companies might secretly agree on prices to make more money, acting like they are one big company instead of many.
Kinked Demand Curve: If one company raises its prices, the others usually don’t follow, and that can lead to losing customers. But if a company lowers its price, others are likely to match it.
All these things make pricing in oligopolies really special!
Oligopolies really shake things up when it comes to how prices are set! Here are some important ways they affect each other’s pricing:
Interdependence: Companies in an oligopoly closely watch their competitors. If one company cuts its prices, the others might do the same to stay in the game.
Price Rigidity: Prices often stay the same because companies are afraid to start a price war. So even if costs go up or down, prices can stay pretty steady.
Collusion: Sometimes, companies might secretly agree on prices to make more money, acting like they are one big company instead of many.
Kinked Demand Curve: If one company raises its prices, the others usually don’t follow, and that can lead to losing customers. But if a company lowers its price, others are likely to match it.
All these things make pricing in oligopolies really special!