The price rigidity in an oligopolistic market is explained by _______
A)price discrimination
B)product differentiation
C)bundling
D)kinked demand curve

Question

Quizplus · Accepted Answer

The kinked demand curve model explains price rigidity in oligopolistic markets by suggesting that firms may not change their prices because of the asymmetric reaction of competitors to price increases versus price decreases. If a firm raises its price, competitors may not follow, leading to a loss of market share. If a firm lowers its price, competitors are likely to follow, preventing the firm from increasing its market share. This creates a situation where prices become rigid.

The Price Rigidity in an Oligopolistic Market Is Explained by _______