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

1 answer

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.