The concepts of mutual interdependence and game theory illustrate the fact that firms competing in oligopoly
A) consider the actions of the rivals before changing the price of their product.
B) ignore the actions of their rivals when considering price changes.
C) engage in frequent price changes.
D) never change prices.
E) will mutually determine the combined best outcome for all players.

Question

Quizplus · Accepted Answer

The concepts of mutual interdependence and game theory suggest that firms in oligopoly consider the actions of their rivals before changing the price of their products. This is because each firm's decision affects the other firms in the market and can lead to a strategic response. Therefore, in order to maximize profits, firms must take into account the potential reactions of their competitors before making any pricing decisions.

The Concepts of Mutual Interdependence and Game Theory Illustrate the Fact