.) Suppose the jeans industry is an oligopoly which earns firm sells its own distinctive brand of jeans. Each firm believes its rivals will not follow its price increases, but will follow its price cuts. Explain the demand curve facing each firm. Does this demand curve mean that firms in the jeans industry do or do not compete against one another.?
2007-03-23 06:57:27 · 3 answers · asked by prettypls, 1 in Social Science ➔ Economics
Yes, they compete against each other. If any one of the firms wants more market share, they just cut their prices.
The Demand curve is EXTREMELY ELASTIC.
2007-03-23 09:13:41 · answer #1 · answered by Santa Barbara 7 · 0⤊ 0⤋
Obviously, in such a market, the quantity demanded for each firm will increase with a cut in prices.Each firm has a relatively elastic demand, or curve sloping upwards.
Of course, its still a competition if one decides to cut prices,bcoz then it will attract more sales and will overun market share of the other firms. This would invite retaliation from the other firms ,by a price war.
2007-03-23 17:00:04 · answer #2 · answered by She-whom-shall-not-be-named 4 · 0⤊ 0⤋
This is game theory like in a Beautiful Mind...
The demand curve is going to end up being elastic and the firms will compete against each other...
2007-03-23 16:42:43 · answer #3 · answered by Pagli 2 · 0⤊ 0⤋