The kinked demand model of noncollusive oligopoly assumes that:

Question

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The kinked demand model assumes that rivals will ignore price increases and match price cuts. This leads to a "sticky" price at the kink, where the demand curve is discontinuous. As a result, the model predicts that firms will have little incentive to change their prices, and will instead focus on non-price competition to gain market share. The other choices are not necessarily assumptions of the kinked demand model.

The Kinked Demand Model of Noncollusive Oligopoly Assumes That