Mutual interdependence among firms in an oligopoly means that:

Question

Quizplus · Accepted Answer

Mutual interdependence means that the decisions and actions of one firm are affected by reactions of other firms in the market. It is difficult to predict how exactly firms will react to decisions of their rivals, making it challenging to plan pricing and output strategies. This makes collusion and reaching a formal agreement difficult or even impossible, ruling out options B and D as correct choices. While firms in an oligopoly may practice price leadership, it is not a guaranteed outcome of mutual interdependence, making option A an incorrect choice.

Mutual Interdependence Among Firms in an Oligopoly Means That