What do you mean by price rigidity? Which type of market structure is characterized by the price rigidity? Explain your views taking an example of industry facing the problem of price rigidity.
Answers
Price rigidity also known as Price stickiness or Sticky price refers to a situation where the price charged for certain goods do not change inspite of changes in input cost or demand patterns.
An oligopoly market is one in which a few firms dominate. It has a large number of buyers but a few sellers.he change in strategy of one (like price) affects the other. The products sold in oligopoly market are ones that can be easily substituted by each other which implies a change in the price of one good is going to affect the demand for other good . As a result a firms tend to stick to the original price and this is called price rigidity in oligopoly.
The prices which respond to the changes in the input unit of cost which is less when a customer is very attentive.
This rigidity can sometimes also be manifested by fluctuation in the prices or costs.
It is in the hands of the seller to change a finite number of or a set of different costs and prices.
This can be even for a continuous input range of cost.