If your competitors will follow your price cuts and ignore price hikes,your firm

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A kinked demand curve occurs in an oligopoly when rival firms follow price cuts but ignore price hikes. This is because each firm believes that if they raise their prices, they will lose customers to their rivals, but if they cut prices, their rivals will follow suit and prices will all end up lower, resulting in no gain for any individual firm. As a result, the demand curve is "kinked" at the existing price level, with a relatively elastic demand curve above the kink (since competitors will follow price cuts) and a relatively inelastic demand curve below the kink (since competitors will not match price hikes).

If Your Competitors Will Follow Your Price Cuts and Ignore