Question

Which of the following are factors that increase short-run price stickiness?
Multiple select question.

Collusion between rivals

Firms' fear of price wars

Lower profits for firms

Consumers preferring stable prices

Answer 1

The factors that increase short-run price stickiness from the options you provided are:

1. **Collusion between rivals** - When firms collude, they often agree to maintain certain price levels to avoid competitive price cuts, leading to price stickiness.

2. **Firms' fear of price wars** - If firms are concerned that lowering prices may trigger a price war (where competitors continuously lower prices), they might choose to keep their prices stable to avoid such a scenario.

3. **Consumers preferring stable prices** - If consumers value stable prices and are resistant to price changes, firms are less likely to change their prices frequently, contributing to price stickiness.

The option **Lower profits for firms** does not typically contribute to price stickiness; if profits are lower, firms might be more willing to change prices to regain profitability.

Therefore, the correct factors that increase short-run price stickiness are the first three options.