Suppose the Tidy Laundry Detergent Company, which sells 40% of all detergent, is thinking about raising its price. Before Tidy makes the change, they analyze the likely responses of the All-Clean Detergent Company, which sells 35% of all detergent, and Cheerful Detergent Company, which sells 20% of all detergent. Tidy's behavior shows
A) mutual interdependence in pricing decisions.
B) nonprice competition.
C) difficult entry in oligopolies.
D) collusion.

Question

Quizplus · Accepted Answer

Tidy's analysis of the responses of All-Clean and Cheerful Detergent indicates that pricing decisions in the detergent market are mutually interdependent, meaning that each company's pricing decision affects the others' profits and market share. This is a characteristic of an oligopoly, in which a small number of firms dominate the market and must consider the actions of their competitors when making decisions. Nonprice competition and difficult entry may also be present in an oligopoly, but neither is specifically demonstrated by Tidy's behavior in this scenario. Collusion, or illegal cooperation among firms to manipulate prices, is not suggested in the scenario.

Suppose the Tidy Laundry Detergent Company, Which Sells 40% of All