Answer to Question #16476 in Microeconomics for Amit

Question

Suppose the jeans industry is having an oligopoly in which each firm sells its own distinctive brand of jeans, and each firm believes its rivals will not follow its price increases but will follow its price cuts. Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another

Answer 1

If the jeans industry is having an oligopoly in which each firm sells its own distinctive brand of jeans, and each firm believes its rivals will not follow its price increases but will follow its price cuts, then all the firms will have a kinked demand curve, this mean that firms in the jeans industry compete against one another, but their competition is another than competitive industry competition, where all the firms are price-takers.