Question

A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a low-price strategy that does not maximize mutual profits.

gini coefficient

herfindahl index

interdependence index

payoff matrix

Answer 1

Option D.

• A payoff matrix can be used to demonstrate why a competitive oligopoly tends to result in a low price strategy that does not maximize mutual profits.
• A payoff matrix demonstrates the strategic choices a party or a firm makes given the choices of his rivals.
• In an oligopoly market, the dominant firm's collude to fix prices of their goods and services. These firms can take decisions independently or can collude so that their decisions are interdependent on other firms in Collusion.
• To demonstrate this interdependence an oligopoly uses the game theory concept and makes use of payoff matrix to demonstrate why a competitive oligopoly results in a low price strategy when it does not collude.