In the framework of an oligopoly, which strategy can function as a silent form of cooperation among firms?

• A. Price leadership
• B. Barriers to entry
• C. Perfect competition
• D. Product differentiation

Answer: (A)

Verified step by step guidance

1. Understand the context: In an oligopoly, a few firms dominate the market, and their decisions affect each other. Firms often seek ways to maximize profits, sometimes by cooperating implicitly rather than explicitly.
2. Define the concept of 'silent cooperation': This refers to firms coordinating their behavior without formal agreements or communication, often to avoid price wars and maintain higher profits.
3. Analyze each option: 'Barriers to entry' prevent new competitors but do not describe cooperation; 'Perfect competition' involves many firms and no cooperation; 'Product differentiation' is about making products distinct, not about cooperation.
4. Focus on 'Price leadership': This is a strategy where one firm sets the price and others follow, effectively coordinating prices without explicit collusion, acting as a silent form of cooperation.
5. Conclude that 'Price leadership' is the strategy that enables firms in an oligopoly to coordinate their pricing behavior implicitly, maintaining market stability and profits.