Which of the following statements is true about how the volatility of demand conditions affects the sustainability of cooperative pricing?
A)Price cutting is easier to detect when demand conditions are volatile
B)Pricing coordination becomes easier in a volatile demand condition because firms are chasing a moving target
C)Price cutting is harder to detect when demand conditions are stable
D)Demand volatility is an especially serious problem when the production involves substantial variable costs
E)Demand volatility is an especially serious problem when the production involves substantial fixed costs

Question

Quizplus · Accepted Answer

When demand conditions are volatile in a cooperative pricing situation, firms may face unpredictable shifts in demand that can make it challenging to maintain agreed-upon prices. This challenge is particularly acute when the production involves substantial fixed costs, which can result in high sunk costs if demand falls unexpectedly. Thus, demand volatility is an especially serious problem when the production involves substantial fixed costs.

Which of the Following Statements Is True About How the Volatility