Commitments
Threats
Promises
All the above
Answer is Right!
Answer is Wrong!
The correct answer is: All of the above.
In an oligopoly market, there are a few large firms that dominate the market. These firms can take actions to put their rivals at a disadvantageous position. These actions can include:
- Commitments. Firms can make commitments to their customers or suppliers that will make it difficult for their rivals to compete. For example, a firm might commit to a certain level of service or quality that its rivals cannot match.
- Threats. Firms can threaten their rivals with actions that will harm them, such as price wars or predatory pricing. This can discourage rivals from entering the market or expanding their operations.
- Promises. Firms can make promises to their customers or suppliers that will make it difficult for their rivals to compete. For example, a firm might promise to give its customers a discount if they switch to its products.
These actions can give firms an advantage over their rivals and help them to maintain their market power. However, they can also harm consumers by reducing competition and leading to higher prices.
Here are some additional details about each of these actions:
- Commitments. Firms can make commitments to their customers or suppliers that will make it difficult for their rivals to compete. For example, a firm might commit to a certain level of service or quality that its rivals cannot match. This can make it difficult for rivals to attract customers away from the firm that has made the commitment.
- Threats. Firms can threaten their rivals with actions that will harm them, such as price wars or predatory pricing. This can discourage rivals from entering the market or expanding their operations. Price wars are when firms compete by lowering their prices below cost. Predatory pricing is when a firm lowers its prices below cost in order to drive its rivals out of business.
- Promises. Firms can make promises to their customers or suppliers that will make it difficult for their rivals to compete. For example, a firm might promise to give its customers a discount if they switch to its products. This can make it difficult for rivals to attract customers away from the firm that has made the promise.
It is important to note that these actions are not always illegal. However, they can be considered anti-competitive if they harm consumers.