In an oligopoly, the kinked demand curve model explains:
A) the number of firms that can profitably exist.
B) the market share of each firm.
C) the outcome of price discrimination.
D) price rigidity among firms.
E) collusive price agreements between firms.

Question

Quizplus · Accepted Answer

The kinked demand curve model explains price rigidity among firms in an oligopoly, where firms are reluctant to change prices in response to changes in cost or demand because they fear that other firms will not follow suit, leading to a loss in market share and revenue.

In an Oligopoly, the Kinked Demand Curve Model Explains