Oligopolistic Reaction Theory

Oligopolistic Reaction Theory describes how companies in an oligopoly (a market with few dominant firms) tend to respond strategically to each other's actions, such as price changes or new product launches. When one firm makes a move, others anticipate the reaction and adjust their strategies accordingly to maintain their market position or profitability. This interdependence leads to a situation where firms carefully consider competitors' likely responses before acting. Essentially, the theory explains the strategic behavior and mutual anticipation that characterize competitive dynamics among a few powerful firms in a market.