Question

Answer the following question.
Why are the firms said to be interdependent in an oligopoly market? Explain.

Answer the following question.
Explain why firms are mutually interdependent in an oligopoly market

Explain the implications of the following:

Interdependence between firms in oligopoly.

Answer the following question.
Explain the feature 'interdependence of firms' in an oligopoly market.

Answer 1

Interdependence between firms:- In an oligopoly market, the price and level of an output of one firm impact the price and level of an output of rival firms. Keeping this impact in mind, a firm decides the price and output in accordance with prevailing market conditions. Hence, a high degree of interdependence exists among competing firms, especially with regard to price and quantity of output.

Answer 2

Inter-dependence between firms - There exists a very high degree of mutual interdependence between the firms in an oligopoly market. The price and the quality decisions of a particular firm are dependent on the price and the quality decisions of the rival (other) firms. Hence, a firm must take into consideration the probable rival reactions, while formulating its own price and output decisions.