The kinked demand curve explains the observation that in oligopoly markets
A)Rivals match price increases.
B)Rivals do not match price reductions.
C)Prices may not change even in the face of cost increases.
D)Practice product differentiation.

Question

Quizplus · Accepted Answer

The kinked demand curve model suggests that prices in an oligopoly are rigid because firms expect rivals to match price decreases but not price increases, leading to a situation where prices remain stable even when costs change.

The Kinked Demand Curve Explains the Observation That in Oligopoly