Explain why price competition is rare in oligopoly

Price competition is considered rare in an oligopoly because it is rarely advantageous for either company.

• If there is little price competition, all suppliers will benefit from higher prices. If one company decides to undercut the market by selling its goods below the current market price, this will likely lead to further price cutting by the competing firms. This can lead to a price war where the suppliers end up losing because they will be giving up the profit that was secure at the previous selling price. For this reason, it is extremely rare to see price competition in an oligopoly compared to a perfectly competitive market.