Suppose the jeans industry is an oligopoly in which each firm sells its own distinctive brand of jeans, and each firm believes its rivals will not follow its price increases but will follow its price...

Solution
Here we are considering an oligopolist jeans industry. In oligopoly market, there are not
too many firms. The main purpose of a firm in any industry is to earn high profits. Here also, in
oligopoly market the motive of each firm is to earn higher profits than its competitors. Suppose a
firm increases its prices then the price increase will not be followed by other firms. This is
because consumers usually buy from the firms which charge lower prices (unless the product is
differentiated) and so by not following the price increase, other firms can increase their market
share and earn higher revenues as compared to what they were earning earlier.
On the other hand, when a firm cut the price of its product then it is followed by a price
cut by all other firms in the industry. Again this is also due to profit...