Which of the following strategies will be most detrimental to firms that are close rivals operating in an oligopolistic industry structure?
A) competing against each other through product differentiation
B) competing against each other through price-cutting
C) competing against each other through new-product introductions
D) competing against each other through lifestyle advertisements

Question

Quizplus · Accepted Answer

When one firm in an oligopoly cuts prices to gain market share from its competitor, the competitor typically will respond in kind and also cut prices. This process initiates a price war, which can be especially detrimental to firm performance if the products are close rivals. Therefore, non-price competition is the preferred mode of competition.

Which of the Following Strategies Will Be Most Detrimental to Firms