When Pepsi is considering a price hike, it needs to consider how Coke may react. This situation is called:
A) mutual interdependence.
B) price leadership.
C) collusion.
D) monopolistic competition.

Question

Quizplus · Accepted Answer

Mutual interdependence refers to a situation where two or more firms compete with each other while also being impacted by each other's decisions. In this case, Pepsi and Coke are competitors and any price change by one company can affect the other's sales and profits. Therefore, when Pepsi considers a price hike, it needs to be mindful of how Coke may respond to it. This is an example of mutual interdependence.

When Pepsi Is Considering a Price Hike, It Needs to Consider