“In a hypothetical market of mobile phones, the brand AWAAZ was leading the market share. Its nearest competitor VAARTA suddenly changed its strategy by bringing in a new model of the mobile phone at a relatively lesser price. In response, AWAAZ too slashed its price.”
Based on the above information, identify the form of market represented and discuss any one feature of the market.
Discuss the primary reason for ‘indeterminateness of demand curve’ under the oligopoly form of market.
The market in the question is ‘Oligopoly’.
Explanation of any one Feature, say Price Rigidity.
Price rigidity is the tendency of oligopolistic firms to stick to the ongoing price of the product, with a view to avoid any sort of price war.
Indeterminateness of Demand Curve: In an Oligopoly form of market no single firm can predict its prospective sales with perfection. This is because any given change in the price/output decision by a rival firm would initiate a series of actions, reactions and counter actions by others. Therefore, there is no certain nature and position of demand curve under this form of market for a firm.