Figure 113

Shifting Demand Under Oligopoly

(a) A price reduction to P2 by firm A temporarily increases output to Q2. As other firms reduce prices, demand shifts back from Dj to D2 and firm A's output drops to Q3. (b) In contrast to Dt and D2, the demand curve D3 reflects firm A's projections of the price reactions of competitors.

Shifting Demand Under Oligopoly

(a) A price reduction to P2 by firm A temporarily increases output to Q2. As other firms reduce prices, demand shifts back from Dj to D2 and firm A's output drops to Q3. (b) In contrast to Dt and D2, the demand curve D3 reflects firm A's projections of the price reactions of competitors.

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