Mutual interdependence means that
A)all firms are price takers.
B)each firm sets its own price based on its anticipated reaction by its competitors.
C)all firms collaborate to establish one price.
D)all firms are free to enter or leave the market.

Question

Quizplus · Accepted Answer

Mutual interdependence refers to a situation where each firm in a market is aware that its pricing decisions will affect the pricing decisions of its competitors. Therefore, each firm will set its own price based on its anticipation of how its competitors will react to its pricing decision. This leads to a situation where firms are not considered price takers, as they have some control over the price they charge. However, they are not able to act independently of each other, hence, the term mutual interdependence.

Mutual Interdependence Means That