Meeting the competitive price often makes sense for a firm in an oligopoly situation, because setting a price above the market will usually result in a large loss of sales it might have gotten at the competitive price.

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In an oligopoly situation, there are only a few firms that dominate the market. These firms are aware of each other's strategies and are constantly trying to gain a competitive advantage. If a firm sets a price above the market, it risks losing customers to its competitors who offer a similar product at a lower price. Thus, setting a competitive price makes more sense as it can help the firm retain its market share and prevent a loss of sales.

Meeting the Competitive Price Often Makes Sense for a Firm