Why are the firms said to be interdependent in an oligopoly market? Explain.
Why are the firms said to be interdependent in an oligopoly market? Explain.
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When there are only a few firms in the market, it is likely that each firm has some knowledge as to how its rivals operate. Each firm expects reactions from the rival firms. Therefore, each firm is deciding price and output, takes into account the expected reactions by the rival firms. In this way firms are interdependent on each other.
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