Explain "perfect knowledge about the markets" feature of perfect competition.
OR
Why are the firms said to be interdependent in an oligopoly market? Explain.
Explain "perfect knowledge about the markets" feature of perfect competition.
OR
Why are the firms said to be interdependent in an oligopoly market? Explain.
In a perfectly competitive market buyers and seller have fire knowledge about the market. So, no seller can charge a price higher than the price determined by the market and no buyer is willing to pay the price higher than market price.
OR
When there are only a few firms in the market, it is likely that each firm has some knowledge as to how its rivals operate. Each firm expects reactions from the rival firm. Therefore, each firm in deciding price and output, takes into account the expected reactions by the rival firms. In this way the firms are interdependent on each other.
In a perfectly competitive market buyers and seller have fire knowledge about the market. So, no seller can charge a price higher than the price determined by the market and no buyer is willing to pay the price higher than market price.
OR
When there are only a few firms in the market, it is likely that each firm has some knowledge as to how its rivals operate. Each firm expects reactions from the rival firm. Therefore, each firm in deciding price and output, takes into account the expected reactions by the rival firms. In this way the firms are interdependent on each other.
