Economics Oligopoly Questions
Price undercutting strategy in oligopoly refers to a pricing tactic where a firm sets its prices lower than its competitors in order to gain a larger market share. This strategy is often used to attract customers away from rival firms and increase the firm's sales volume. By offering lower prices, the firm aims to create a competitive advantage and potentially drive competitors out of the market. However, this strategy can lead to price wars and reduced profitability for all firms involved in the oligopoly.