Question

Suppose three companies, Optimax, Megachug, and Thirstoid, dominate the sports drink market. Optimax enjoys the largest market share. Each time Optimax changes the price of its sports drink, the other two firms match its price. This is an example of: A price war Price leadership A cartel

Answer 1

Price war

Step-by-step explanation:

A price war is a method of selling by making your prices lower than the competition, where they will then try to sell for lower

Answer 2

Price leadership

Step-by-step explanation:

This is an example of price leadership. In this example, we learn that the drinks compete in the market, but Optimax enjoys the largest market share. Moreover, we also learn that whenever Optimax changes its price, the other ones follow. This occurs because the dominant firm (price leader) sets the price of the goods in the market. As this firm dominates most sales of the drink, the other firms have no option but to match the prices in order to try to hold on to their market share.