What kind of competition is generally described as price competition?

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BlackTom AI · Accepted Answer

In addressing the question about what kind of competition is generally described as price competition, I’ll evaluate each option one by one to distinguish price behavior from other competitive dimensions.
Option A: Cournot competition. Here firms compete on quantity rather than price, choosing output levels to maximize profits given rivals’ outputs. This models quantity competition, not price competition, so it does not fit the description.
Option B: Perfect competition. While price is determined by the market in a perfectly competitive setting and firms are price takers, the term price competition is not the standard label used for this model. The hallmark is identical products with free entry, price-taking behavior, and equilibrium price, rather than strategic price competition among few firms.
Option C: Monopolistic competition. In this setup, firms have some price-setting power due to product differentiation, but competition is more about product variety and advertising than pure price competition. The phrasing “price competition” would typically imply a clear focus on price as the main competitive weapon, which isn’t the defining feature here.
Option D: Bertrand competition. This is the classic model where firms compete by setting prices, assuming homogeneous products and other factors equal. The key characteristic is price competition leading to outcomes where the lowest price prevails, which aligns directly with the description in the question.
Option E: Resource competition. This term does not correspond to a standard, widely recognized model of price or quantity competition in industrial organization. It’s not a conventional description of competition types in this context, making it an unsuitable answer.
Summarizing the reasoning, the word “price competition” points to firms undercutting each other on price to gain market share, which is emblematic of Bertrand competition, whereas the other options emphasize quantity, differentiation, market structure, or nonstandard terms that don’t capture the essence of price-focused rivalry.

What kind of competition is generally described as price competition?

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