Implications of the Prisoners’ Dilemma for Oligopolistic Pricing
3 years ago
Microeconomics
Price rigidity – Characteristic of oligopolistic markets by which firms are reluctant to change prices even if costs or demands change.
Kinked demand curve model – Oligopoly model in which each firm faces a demand curve kinked at the currently prevailing price: at higher prices demand is very elastic, whereas at lower prices it is inelastic.
Price signaling – Form of implicit collusion in which a firm announces a price increase in the hope that other firms will follow suit.
Price leadership – Pattern of pricing in which one firm regularly announces price changes that other firms then match.
Dominant firm – Firm with a large share of total sales that sets price to maximize profits, taking into account the supply response of smaller firms.
Bijay Satyal
Dec 1, 2021