Why wouldn't other firms follow suit if an individual firm decides to cut its price? Why doesn't the demand curve an individual firm faces in a perfectly competitive market have the same elasticity as it does in a oligopolistic market?
Under perfect competition, if a firm increases its price fractionally, consumers will turn away from it and look for alternatives. On the flip side, if a firm reduces its price fractionally, it can capture the entire market. So why wouldn't other firms follow in footstep like they do in a oligopolistic market?
There could be many answers, but the one that comes to my mind immediately is product differentiation. If you're selling exactly the same thing as everyone else, buyers are going to flock to the lowest price buyer, so you everyone will have to follow a price cut. But say you are selling ice cream cones on the boardwalk at the beach. Any little thing, such as a slightly better location, a better selection of flavors, or a cheerier clerk scooping the cones could be enough to let you keep a good chunk of your customers without cutting the price.
BTW, even a slight perceived difference among sellers would (technically speaking) make the market an oligopoly, not perfect competition. In perfect competition, by definition, there can't be any differences. That is why we call perfect competition an &quot;ideal type,&quot; not a description of real-world markets.