If two firms are engaging in price fixing, and one firm lowers its price, the other firm will always interpret this as underpricing.

Name: If two firms are engaging in price fixing, and one firm lowers its price, the other firm will always interpret this as underpricing.
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Question

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If one firm lowers its price in a price-fixing agreement, the other firm may interpret it as a breach of the agreement and may retaliate with further price reductions or other actions, rather than assuming it is underpricing.

If Two Firms Are Engaging in Price Fixing, and One