question archive The market for electronic readers consists of relatively few firms, including Amazon, Sony, and Plastic Logic
The market for electronic readers consists of relatively few firms, including Amazon, Sony, and Plastic Logic
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The market for electronic readers consists of relatively few firms, including Amazon, Sony, and Plastic Logic. In an interview, Walter Mossberg of the Wall Street Journal asked Rich Archuleta, CEO of Plastic Logic, what price the company would be charging for a new electronic reader that it was developing, aimed at business users. Archuleta declined to give a specific price, saying instead, "The market sets pricing. We don't set pricing." But Plastic Logic is competing in an oligopolistic industry, so shouldn't the firm, not the market, be setting the price? Explain why Archuleta made this statement.
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Archuleta likely meant that although firms in an oligopoly select their competitive forces and prices, such as evaluate which price maximizes profits and competition from existing firms.
Explanation:
In an oligopoly, the firms compete with each other based on the quantity and price of the products and services. The public declaration of the product's price before launch by the firm is treated as declaring the firm's strategy for its competitor. This will give a benefit to its competitor in terms of setting quantity and price.
Therefore, the firm leading to losses to the competitor in entering the market.
