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Price Rigidity

Price rigidity arises because MC always cuts MR at the discontinuous portion.

Any changes in cost will not affect the price at all, as shown below.

2353_price rigidity.png

Formation of Cartel 

Some form of collusion or cartel exist when oligopoly firms come together to determine price and output policies.                                  

This is necessary to avoid price wars.

Non-Price Competition

  • Product differentiation
  • Sales promotion

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