Asked by Dominique Harris on May 16, 2024
Verified
A breakdown in price leadership leading to successive rounds of price cuts is known as:
A) limit pricing.
B) a price war.
C) informal pricing.
D) price discrimination.
Price War
Successive, competitive, and continued decreases in the prices charged by firms in an oligopolistic industry. At each stage of the price war, one firm lowers its price below its rivals’ price, hoping to increase its sales and revenues at its rivals’ expense. The war ends when the price decreases cease.
Limit Pricing
A strategy used by dominant firms to set prices low enough to discourage entry into the market by potential competitors.
Informal Pricing
The establishment of prices based on flexible, non-regulatory factors such as negotiation, haggling, or customary practices, rather than fixed price tags.
- Comprehend the significance of strategic tactics and collusion amongst competitors in an oligopolistic market structure.
Verified Answer
Learning Objectives
- Comprehend the significance of strategic tactics and collusion amongst competitors in an oligopolistic market structure.
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