Oligopolists have an incentive to coordinate price because with coordination
A)The demand for each firm's product is kinked.
B)Each firm faces a perfectly inelastic demand for its product.
C)The market demand curve is perfectly inelastic.
D)Each firm faces a relatively inelastic demand for its product.

Question

Quizplus · Accepted Answer

When firms in an oligopoly coordinate price, they can effectively act as a monopolist and increase their profits. This is because each firm faces a relatively inelastic demand curve for their product, meaning that a change in price will not significantly impact the quantity demanded. Thus, firms can increase their prices without losing too many customers to competitors, resulting in higher profits for all firms involved in the coordination.

Oligopolists Have an Incentive to Coordinate Price Because with Coordination