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What is meant by prices being rigid? How can oligopoly behaviour lead to such an outcome?

Answer» <html><body><p></p>Solution :Prices being rigid or price rigidity refers to a <a href="https://interviewquestions.tuteehub.com/tag/situation-1210683" style="font-weight:bold;" target="_blank" title="Click to know more about SITUATION">SITUATION</a> in which price tends to stay fixed irrespective of changes in demand and supply conditions. In an oligopolistic market, firms are in a position to influence the prices. However, they stick to their prices in order to avoid a price war. If a firm tries to reduce the price, the <a href="https://interviewquestions.tuteehub.com/tag/rivals-1189942" style="font-weight:bold;" target="_blank" title="Click to know more about RIVALS">RIVALS</a> will also react by reducing their prices. So, it will be of no benefit. Likewise, if a firm tries to raise the price, other firms might not do so. As a <a href="https://interviewquestions.tuteehub.com/tag/result-1187343" style="font-weight:bold;" target="_blank" title="Click to know more about RESULT">RESULT</a>, the firm which intended to raise the price will lose its <a href="https://interviewquestions.tuteehub.com/tag/customers-25461" style="font-weight:bold;" target="_blank" title="Click to know more about CUSTOMERS">CUSTOMERS</a>. So, oligopoly <a href="https://interviewquestions.tuteehub.com/tag/behaviour-894636" style="font-weight:bold;" target="_blank" title="Click to know more about BEHAVIOUR">BEHAVIOUR</a> leads to price rigidity in an oligopolistic market</body></html>


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