If an oligopolistic firm in a game theory kind of market cuts price, in the long run
A) the other firms will follow and all firms will be worse off
B) the price cutter will be worse off if other firms don't cut price as well because revenue equals price times output and since price was cut, its revenue must be less
C) its market share and profit will increase at the expense of its rivals
D) the other firms will follow and all firms will be better off because at lower prices, industry sales will increase
E) it will become a monopoly, having outsmarted its rivals, and will be able to raise the price again. That's how the game is played.

Question

Quizplus · Accepted Answer

In an oligopolistic market, firms are highly interdependent. If one firm cuts prices, others are likely to follow to maintain their market share, leading to a situation where all firms might end up worse off due to reduced margins. This is because the price cut could initiate a price war, reducing profits for all.

If an Oligopolistic Firm in a Game Theory Kind of Market