In the kinked demand curve oligopoly model, a firm that raises its price will experience:
A) a relatively small decrease in sales due to the Law of Demand.
B) an increase in sales because the price increase will signal higher quality.
C) no change in sales because competing firms will raise their prices by the same amount.
D) a relatively large decrease in sales as its customers switch to other lower-priced competitors.

Question

Quizplus · Accepted Answer

In the kinked demand curve oligopoly model, if a firm raises its price, it is likely to lose a significant number of customers to its competitors who maintain lower prices, leading to a relatively large decrease in sales.

In the Kinked Demand Curve Oligopoly Model, a Firm That