In oligopoly a kinked demand curve explain
Answer (1)
20th Aug, 2021
Hello,
When the demand curve is not in straight line but has a different elasticity for higher and lower prices that is when a kinked demand curve occurs.
An oligopoly is an example for a kinked demand curve because the oligopoly is in competition from other oligopolists in the market. The prices are rigid and the firms will face different effects for the increasing or decreasing prices. The kink occurs because rival firms will behave differently to price cuts and price increases. If the oligopolist increases its price above the equilibrium price, it is assumed that the other oligopolists in the market will not follow with price increases of their own.
Hope this helps!
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