Economics Oligopoly Questions
Price rigidity in oligopoly refers to the tendency of firms in an oligopolistic market structure to maintain stable prices over a certain period of time, despite changes in costs or demand. This is primarily due to the interdependence among firms in an oligopoly, where any change in price by one firm can have significant effects on the market and the actions of other firms. As a result, firms often engage in tacit collusion or strategic behavior to avoid price wars and maintain their market share. This leads to price rigidity, where prices remain relatively stable and do not fluctuate frequently.