Question

Assume a duopoly of office supply big box stores where each carries the same merchandise and each advertises that it will "meet or beat" any competitor's price. Assume further that they have no online competition from anyone else. How does the "meet or beat" policy affect buyers in terms of the prices offered to them over the long run? What does this suggest about oligopolistic behavior generally? Decide whether and how consumers would benefit from this situation.

Answer 1

Given a duopoly of office supply big box stores where each carries the same merchandise and each advertises that it will "meet or beat" any competitor's price. It is also further assumed that they have no online competition fconsumerse else. To meet or beat a competitor's price means that to provide the good or service at the same price or even a better price.

The "meet or beat" policy of the suppliers will be very profitable for the buyers, this is because due to this policy of the suppliers they will get the product at the lowest price even in the long run. This is because since there are only two suppliers and both guarantee meet or beat so if the price of one of them is less than the other, the former will quickly match that price or decrease the price even below and hence in response to the former decision the latter will do the same and hence the price in the market will always be lowest. So this will ultimately help the buyers because they can be guaranteed a low price in the long run.

As we generally know that in an Oligopoly there is less competition and the chance of cooperation between the producers/sellers in more. But from the present situation we can say that competition is also very much possible in an Oligopoly market. If the producers decide to decrease their price to gain more market share and hence profit, there may be a price war in an Oligopoly market.

This whole situation of meet or beat and the price war is finally beneficial for the consumers, this is because due to this situation they get the product at the lowest price which would otherwise must have been very high if the firms would try to cooperate among themselves and gain monopoly powers.