When firms in a market offer to "match any lower price offered by any competitor" but do not match price increases, then

Question

Quizplus · Accepted Answer

This behavior suggests that firms may face kinked demand curves, a concept often associated with oligopolistic markets. In such markets, firms may reduce prices to match competitors to maintain market share, but they avoid increasing prices for fear of losing customers to competitors. This results in a demand curve that is relatively elastic for price increases (demand drops significantly with a price increase) and relatively inelastic for price decreases (demand does not increase as much with a price decrease), creating a "kink" in the demand curve.

When Firms in a Market Offer to "Match Any Lower