15-1. Major considerations among oligopolists is the desire to keep price changes to a minimum because of the nature of an oligopoly (few sellers in the market). If an oligopolists decreases his price even slightly, competitors are likely to do the same in order to avoid losing business (customers are likely to be highly attracted to the new lower price). On the other hand, raising prices even a small bit can result in a tremendous loss of business. Competitors are likely to keep their prices the same, creating a difference between the maverick and the rest of the industry, and customers are likely to move to the lower priced products in order to take advantage of the better pricing. Awareness of the competition, awareness of the market and the customer, and a desire to maintain the status quo (in terms of market share) would all be considerations that the oligopolist takes into account.
15-2. Mergers and acquisitions are both concerned with two businesses entities becoming a single entity, but there are subtle differences between the two terms. Mergers refer to the uniting of two companies, generally in the same industry, where economies of scale can be realized and where the resulting company has considerable advantage over the two companies operated separately. Acquisitions refer to one company essentially taking over another; this can happen in the same industry, such as when a competitor takes over another competitor, or among companies in different industries. Acquired companies may be closed down or sold off in their component pieces in order to realize immediate profit from the transaction. Mergers and acquisitions offer good ways for companies to enter new markets, either by acquiring new technology or products, or gaining rapid entrance to attractive geographic markets.
15-3. Short-term interest rates are generally more volatile than long-term interest rates, in part because companies are reluctant to commit to c...