The kinked demand curve model assumes that an oligopolistic firm recognizes its mutual interdependence with other firms and, collusive agreements in the industry lead to the tendency for all firms in an industry to charge approximately the same price for a specific product over long periods of time.

Question

Quizplus · Accepted Answer

The kinked demand curve model assumes that firms in an oligopoly are interdependent and react to competitors' pricing, but it does not inherently involve collusive agreements or explain price uniformity over long periods.

The Kinked Demand Curve Model Assumes That an Oligopolistic Firm