If an oligopolist reduces the price of its product relative to its competitors:

Question

Quizplus · Accepted Answer

When an oligopolist reduces the price of its product relative to its competitors, some customers may switch from rival firms to buy from them, as the product becomes more attractive at a lower price point. This is known as price competition. However, it's also possible that some customers may switch to rival firms that still offer a better product at a higher price point. It is unlikely that rival firms will not react to the price reduction, so option D can be ruled out. Option B is also unlikely, as price is a major factor that customers consider when making purchases, so some customers are likely to switch based on price alone.

If an Oligopolist Reduces the Price of Its Product Relative