If marginal costs fall anywhere between MC₁ and MC₂ the firm will choose to leave price and output unchanged. Because of its belief about how other firms will respond to a price change the firm is better off not altering price even in the face of rather significant changes in production costs.

As we will see, strategic considerations can cause behavior that varies considerably from the simple mechanistic responses predicted by profit maximization. Not that there is anything wrong with the profit maximzing model in other industrial structures, but it dosen't capture the rich strategic complexity that we must allow for in our study of oligopoly.

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