Why do oligopolists tend to change their price less frequently than perfect competitors?
A) because their demand curves are inelastic
B) because they often are subject to government price controls
C) because they are uncertain as to how their competitors will react
D) because the demand curve for their product is not as volatile

Question

Quizplus · Accepted Answer

Oligopolists are often hesitant to change prices due to the uncertainty of how their competitors will react. In an oligopoly, a few firms dominate the market, and each firm's actions can significantly impact the others. A price change by one firm can lead to retaliatory actions by competitors, such as price wars, which can be detrimental to all firms involved. Therefore, oligopolists may prefer to maintain stable prices to avoid unpredictable competitive reactions.

Why Do Oligopolists Tend to Change Their Price Less Frequently