A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits.
A) interdependence index
B) gini coefficient
C) herfindahl index
D) payoff matrix

Question

Quizplus · Accepted Answer

A payoff matrix can illustrate how, in a competitive oligopoly, each firm's optimal strategy leads to a scenario where all firms choose a low-price strategy to avoid losing market share. This results in lower profits for all firms compared to if they had coordinated and jointly raised prices to maximize mutual profits. The other options (interdependence index, gini coefficient, and herfindahl index) do not specifically address the issue of a low-price strategy in a competitive oligopoly.

A(n) ____ Can Be Used to Demonstrate Why a Competitive