The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the ________ model.
A) Cournot
B) Stackelberg
C) dominant firm
D) kinked demand

Question

Quizplus · Accepted Answer

The kinked demand model predicts that prices in oligopolies will be very rigid because firms are hesitant to raise prices above the kink point, but may be willing to lower prices in response to competitive pressures. This creates a situation where prices are stuck in a narrow range, leading to price rigidity. The Cournot and Stackelberg models both predict interdependence among firms, but do not specifically address price rigidity. The dominant firm model focuses on the relationship between a dominant firm and smaller firms in the market.

The Oligopoly Model That Predicts That Oligopoly Prices Will Tend