Question

Why are prices in non-cooperative oligopolistic markets sticky?

Answer 1

In case of a non-cooperative oligopoly, if a firm reduces the price of its product, other firms will follow it immediately, i.e. other firms also reduce their price. So, the first firm could not get much benefit from the price reduction. But, when a firm increases the price of its product, other firms would not follow, i.e., they would not increase the price of there product. So, the firm would lose its customers.

Therefore, there is no incentive for the firms to either increase or decrease the price of its product in a non-cooperative oligopolistic. So. price becomes sticky.

One of the solution for non-cooperative oligopolistic markets is Kinked-demand curve analysis.