Prepare a note on price rigidity.

1.	Prepare a note on price rigidity.
Answer» Price rigidity is an important feature of oligopoly. Price rigidity means that price will remain rigid without much fluctuation. This is because, price increase by one firm will not be followed by other firms. However, price reduction by one firm will be followed by other firms, due to this; the firm affecting price change will not get the benefits from the reduction of price. Therefore, no firm will reduce or increase the price. This leads to a situation of price rigidity in the oligopoly markets.

Answer»

Price rigidity is an important feature of oligopoly. Price rigidity means that price will remain rigid without much fluctuation. This is because, price increase by one firm will not be followed by other firms.

However, price reduction by one firm will be followed by other firms, due to this; the firm affecting price change will not get the benefits from the reduction of price. Therefore, no firm will reduce or increase the price. This leads to a situation of price rigidity in the oligopoly markets.

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