suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. this is called

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04-11-2022
Business

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suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. this is called

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smecloudbird18 smecloudbird18 · Answer 1 · 2022-11-08T22:16:21-05:00

This is called: limit pricing. Limit pricing refers to the pricing used by incumbent corporations to discourage or prevent entry or expansion of fringe industry.

The limit price is lower than the profit-maximizing price in the short run, but higher than the competitive level. Limit pricing is unlawful in some jurisdictions and may be ineffective in keeping a determined market entrant out in the long run. industry, it may be effective in lessening market rivalry in the short to medium term. Limit pricing is a pricing tactic used to create a barrier to entry and protect a company's monopoly power and supernormal profit.

To learn more about Limit pricing, click here.

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