Economics Oligopoly Questions
Price signaling is a concept in oligopoly where firms use their pricing decisions to communicate information to other firms in the market. It involves one firm adjusting its price, either upward or downward, to indicate its intentions or strategies to its competitors. This can include signaling a desire to maintain market share, deter new entrants, or signal a change in market conditions. Price signaling helps firms in an oligopoly to coordinate their actions and avoid price wars, leading to more stable and predictable market outcomes.