The assumption that firms will match a reduction but not an increase in the prevailing price that is responsible for the stability of duopolistic and oligopolistic markets is known as the

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The assumption that firms will match a reduction but not an increase in the prevailing price is known as the kinked-demand curve conjecture. This theory explains why duopolistic and oligopolistic markets tend to be stable and less prone to price wars. The idea is that if one firm lowers its price, the other firms will match the reduction to avoid losing market share. However, if one firm raises its price, the other firms will not follow suit because they fear losing customers to their competitors who maintain their lower prices. This creates a "kink" in the demand curve at the prevailing price and explains why prices tend to stabilize in these markets.

The Assumption That Firms Will Match a Reduction but Not