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As a small number of big firms are dominating the market, even a small change by one firm would affect all the firms in the market as no firm would wish to lose out. A firm which introduces something new would be soon followed by other dominating firms as they would try to expand their own market shares and prevent their loyal customers from buying products from another dominating firm.

Every dominating firm is dependent on another. Rival firms closely watch each other. When one firm reduces their prices, the other dominating firms follow and reduce their prices. This is so that they do not lose out and lose customers. However, if firms fail to predict their rivals’ moves properly, they might lose profit.

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