Explore BrainMass

Explore BrainMass

    Oligopoly: Underlying assumptions of the kinked-demand curve

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What assumptions about a rival's response to price changes underlie the kinked-demand curve for oligopolists? Why is there a gap in the oligopolist's marginal-revenue curve? How does the kinked-demand curve explain price rigidity in oligopoly? What are the shortcomings of the kinked-demand model?

    © BrainMass Inc. brainmass.com October 9, 2019, 6:48 pm ad1c9bdddf

    Solution Preview

    The basic assumption in the kinked demand curve theory is that if a single firm lowers its price, the other firms in the industry will move to match it, but if ...

    Solution Summary

    Underlying assumptions of the kinked-demand curve for oligpolists and the shortcomings of this model.