Prices are inflexible in the short run for various reasons, two of which are discussed in this
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Prices are inflexible in the short run for various reasons, two of which are discussed in this chapter. First, firms often attempt to set and maintain stable prices to please customers who like predictable prices because they make for easy planning (and who might become upset if prices were volatile). Second, a firm with just a few competitors may be reluctant to cut its price due to the fear of starting a price war, a situation in which its competitors retaliate by cutting their prices as well—thereby leaving the firm worse off than it was to begin with.
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Economics Principles Problems And Policies
ISBN: 9780073511443
19th Edition
Authors: Campbell Mcconnell ,Stanley Brue ,Sean Flynn
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