StartseiteWhat Is An Agreement Among Firms To Charge One Price For The Same Good Called

Price leadership also has the potential to eliminate (or reduce) price wars. If a market is made up entirely of companies of similar size, price wars could occur without price leadership if each competitor tries to increase its market share. The barometric price leadership model occurs when a particular firm is more adept than others at identifying changes in applicable market forces, such as . B a change in production costs. This allows the company to respond more effectively to market forces. For example, the company may initiate a price change. Price leadership can also be unfair to small businesses, as small businesses trying to match a leader`s prices may not have the same economies of scale as executives. This can make it difficult for them to maintain constant price declines (and stay in business for the long term). Because oligopolies cannot sign a legally enforceable contract to act as a monopoly, companies can instead closely monitor what other companies produce and charge. Alternatively, oligopolists may choose to act in such a way as to put pressure on each company to stick to its agreed production volume.

Use these flashcards to memorize information. Look at the big map and try to remember what`s on the other side. Then click on the card to return it. If you knew the answer, click the green Knowledge box. Otherwise, click the red Don`t know box. Many real oligopolies, driven by economic change, legal and political pressures, and the egos of their senior executives, are going through episodes of collaboration and competition. If oligopolies could maintain cooperation in production and pricing, they could make profits as if they were a single monopoly. However, any company in an oligopoly has an incentive to produce more and gain a larger share of the overall market; When companies start to behave in this way, the outcome of the market can be similar to that of a highly competitive market in terms of price and quantity. Perhaps the simplest approach for the best collusion oligopolists, as you can imagine, would be to sign a contract with one another to keep production low and prices high.